Plan Your Retirement Savings According to Your Individual Needs
Each person is an individual with very specific needs and desires. Just look around you and you can easily see that this is true. And thank goodness it is. Life would be pretty boring if we all looked and acted exactly the same. However, when planning for retirement this is one of the most important factors to include.
Yet most research on how much to save for retirement assumes that everyone has the same state of health, will live the same amount of time, and have the same goals for their money.
If you and your co-workers are of a similar age, you may well start out in your twenties with similar goals and intentions. But the differences compound as you get closer to retirement age.
Most retirement planning calculators assume that everyone will be in good health, want to take Social Security at the same age, and will be saving for their retirement only, not to fund other goals or plans such as bequests.
Nothing could be further from the truth! That scenario applies to only four percent of Americans.
As you approach retirement age, however, disparities tend to emerge. The status of your health can change dramatically as you age. What you enjoy doing or can do could also change.
While one person remains fit and healthy and yearns to travel, another might have to consider taking Social Security earlier and rely on their retirement fund to cover healthcare costs. It’s the differences that will dictate how much you will have to take out of your retirement fund.
State of your health
A review of 22 studies on health and retirement found that the longevity of someone who retires with poor health compared with someone with excellent health is about five years. That’s a big difference in the amount of money needed for retirement.
Let’s assume that both retirees start with the same amount in their retirement fund. Because the retiree with excellent health needs to fund an extra five years in retirement, they should withdraw less each month than the one with poor health. Even though the person in poor health will probably have higher healthcare costs, that should have been calculated into the monthly required amount.
Age for retirement
“Deciding when to retire may be one of the most important financial decisions you make,” says Martin Walcoe, President of David Lerner Associates. “If you are in excellent health and you decide to keep working until you’re 70, but not only do you have five extra years to top up the fund, not having to withdraw funds for those five years gives the fund extra time to grow.”
Talk to your financial advisor and get more insights that can help you plan your retirement income.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
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Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
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David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC