In our series on retirement, I’m perplexed by the focus on How much I have saved versus how much I spend?
It is true the more I have saved will reflect on what type of retirement I will enjoy. But I believe our primary focus should be on my expenses first and foremost.
Hello Dave Duley here, lead advisor with Georgia Advisory Group, a registered investment advisory firm. And Yes, a fudiciary, time and again, I get the question, Dave, Can I retire? yet based on what you know you’ve currently saved? My reply is always tell me what you spend. That’s more important.
Here’s a quick list of items you need to check off and get the answers to on a monthly basis of expenses like- Mortgage, Rent, (What will it be during your retirement?) Property taxes, (utilities that are going to cost you monthly) Car payments or Insurance on those Vehicles, entertainment expenses, cable, internet, cell phone expenses, food, eating out, spend on clothing. Most of these expenses are monthly reoccurring charges. Now, basic health, medicines, and the deductibles for your insurance that insurance won’t cover.
Items such as these are the type of items that add up over a monthly period, Insurance costs or premiums from Medicare part A and Part B and of course, your Medicare supplement that covers what Medicare won’t. What about long-term care or Home Care type insurance? I know this sounds exhaustive and there’s a lot more, but these are real expenses that you can nail down to an approximate monthly expense to begin to grasp what will be expected in retirement, by having this number, first and foremost, you can now begin to determine the type of Investments you will need for retirement. Now, why is this so important?
Assume your expenses will be, let’s say $5000 a month at retirement and you’ve only saved $200,000. You may have no choice but to place those dollars in an annuity that guarantees certain monthly income guaranteed for the remainder of your life. If your expenses, let’s say, are $8000 a month, but you’ve saved up $750,000 in savings, then a combination of fixed income and investments in the stock market is a possibility. The problem with relying on Social Security for both spouses is once one of you passes half your income is gone overnight, relying on the stock market returns only to generate income can be a nightmare if you happen to retire during an extended downturn or the risk is just not an option for you.
So getting a solid grasp on anticipated expenses which are usually fixed is far more important than how much I have saved. This gives your advisor a clear picture on what vehicles to use to get your to your goal. It may be one option or a combination of several, but getting a clear understanding of what it will take to retire and the expenses involved should be your primary focus and your first step on your current standard of living. Many people try to convince themselves their daily expenses will drop in retirement and I would agree to a point. But after 40 years managing clients money, I can assure you that reduction is not all that much. We’re creatures of habits and we enjoy certain things.
Listen, each of us have a different standard where yours may be simple. Someone else’s maybe more complicated. So, here’s the great news if there are plans available for each of us. Our job as professional advisors is to make sure you have a full grasp of what lies ahead. So the road ahead is a smooth one and we have planned for every contingency that it can possibly come our way.
Now, listen to me, Don’t wait to the last few years to get these numbers in front of you. Do it today. Do it now. If you enjoy these videos, subscribe below. Click the like button. Better yet, goes to the see more button, below and visit our website where there is awesome information to help you ask the right questions to your advisor or even to us. If you want a comprehensive look at are you ready for retirement? Fill out our form and we will provide you with an extensive overview of where you stand. Till next time.