Re­tire­ment readi­ness

Cal­cu­lat­ing your re­tire­ment needs

Arkansas Democrat-Gazette - - MONEY&MARKETSEXTRA -

It’s tough to plan for re­tire­ment, but that’s no rea­son to wing it when it comes to fi­nan­cial plan­ning. The in­come, liv­ing ex­penses and life spans of to­day’s re­tirees can help you pre­pare for your own.

1 What is “av­er­age”? Govern­ment and Gallup data re­veal a lot about what re­tire­ment is like for Amer­i­cans to­day. It usu­ally starts at age 61, even though many tell Gallup they planned to work longer. And based on some mor­bid math, some­one who is still alive in their early 60s should plan on be­ing alive for a few decades.

The av­er­age bud­get for re­tirees, ac­cord­ing to Bureau of La­bor Statis­tics data, is $46,000 per year for house­holds headed by some­one 65 or older, ver­sus the $57,000 av­er­age spent by all U.S. house­holds. The top three monthly ex­penses for those older house­holds are hous­ing ($1,322), health care ($500) and food ($484).

2 Will the money last? On­line re­tire­ment cal­cu­la­tors use your cur­rent sav­ing, spend­ing and in­vest­ment pro­file to project a more ac­cu­rate pic­ture of your re­tire­ment readi­ness.

What if the cal­cu­la­tor shows you’ll out­live your re­tire­ment sav­ings? If you’re not yet re­tired, con­sider fixes such as con­tribut­ing more or post­pon­ing re­tire­ment. 3

Pad your re­tire­ment pay­check If you’re al­ready re­tired there are ways to make up for in­suf­fi­cient funds. • Lever­age your home. If you have sub­stan­tial eq­uity in your home, a re­v­erse mort­gage can turn this as­set into in­come. You'll re­ceive a reg­u­lar check as long as you're liv­ing in the house. When you exit the premises to move else­where or on to the great be­yond, the checks stop and your es­tate must re­pay the loan.

• Shop for an im­me­di­ate an­nu­ity. Although an­nu­ities are com­plex in­stru­ments — they’re es­sen­tially in­vest­ments baked into an in­sur­ance pol­icy — pay­ing a lump sum up­front to get a guar­an­teed monthly pay­ment for life may pro­vide the in­come sta­bil­ity you need.

• With­draw less money dur­ing down years. A com­mon rule of thumb among fi­nan­cial pros is the 4 per­cent rule, which sug­gests that a re­tiree can with­draw that amount an­nu­ally from a port­fo­lio in­vested half in stocks and half in bonds with­out de­plet­ing their fi­nan­cial re­serves be­fore they die. If you can be flex­i­ble and with­draw less when mar­ket re­turns are lower than ex­pected or you’ve got re­serves from pre­vi­ous years’ with­drawals, you can make your money last longer.

• Seek as­sis­tance. Govern­ment, non­profit and for-profit pro­grams pro­vide ben­e­fits to strug­gling se­niors. The Na­tional Coun­cil on Ag­ing (NCOA.org) helps the 60-plus set nav­i­gate things such as Sup­ple­men­tal Se­cu­rity In­come, Med­i­caid, debt man­age­ment pro­grams and sub­si­dized hous­ing.

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