How do I know my husband and I are saving enough for retirement? Is there a formula to use as a guideline?

We currently have an Annuity, some savings, and few investments, but I always wonder if we could be doing more. Neither of us are big risk takers.

Asked by Beverly

4 Answers

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Answered by Stephen Hartel, MBA, AIF in Denver, CO
Beverly, I think it is a good idea to think about retirement in two main categories. The first category is your living expenses. A simple rule of thumb is that you need $1M in assets for every $40,000-$50,000 of income you want in retirement. The exact amount should be worked out with your advisor to make sure it is appropriate for your specific situation.

The second category is for advanced medical care. The average 65 year old couple will spend $250,000 in today's dollars in out-of-pocket expenses for advanced medical care. If you aren't yet age 65, remember to account for inflation between now and when you will be age 65. While the long-term average rate of inflation is around 3.5%, healthcare costs have been increasing at about 6%.

Remember that your retirement is likely to be 20-30 years long. That's so much longer than your grandparents or even your parents had. This is one time where using your ancestors as role models for retirement planning might not be a good idea! | 10.06.15 @ 19:38
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:39
Answered by James Pupillo, CIMA, CIMC, C(k)P, GFS, TFMC in Scottsdale, AZ
Hi Beverly
We recommend "Balancing your Balance Sheet" approach for solving this goal. In other words, one should frame the equation for matching your assets (investments) to your liabilities (retirement income needs) to solve for identifying the targeted return needed to fund your Retirement Income Replacement Rate (RIRR) (or the income you will need to retire comfortably).

As it relates to your risk profile mentioned(not big risk takers), I would mention your risk is not capital market volatility (market value fluctuation) but rather not having enough assets accumulated to fund your the amount of income you will need in retirement. Volatility can be your friend in adopting a dollar cost averaging strategy with equal salary deferrals to a 401k, IRA or any investment accounts. The key is to refrain from market timing and maintaining a globally diversified portfolio designed to meet or exceed the targeted return needed to achieve the RIRR goal!

Jim Pupillo
HighTower|Scottsdale
| 10.06.15 @ 20:20
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:39
Answered by Kipley Lytel, Financial Adviser in Santa Barbara, CA
You will find that return is as critical as how much you save and how early you started. You should calculate what return pathway is required based on your risk tolerance and constraints, income and financial assets.

Best of luck.
| 10.06.15 @ 21:10
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:39
Answered by Stacy Marcus, CDFA™ CFEI™ in New York, NY
Dear Beverly, in order to answer your question we use a financial software program to allow you to see how much money you will need to maintain, improve or change your lifestyle in retirement and then based on various investment return scenarios how much you would need to invest. The value of such a tool is it allows us to run many, many scenarios based on the weight you assign to each goal. We can look at the scenario from both sides - 1) if your currently investments return a certain amount, how much money will you have available to live on for the remainder of your life after retirement, or 2) if you know you want to maintain a certain standard of living in your retirement costing $ X amount in today's dollars, how much money will you need to generate. The program is visual so you can see by changing one variable the impact on others - for example, if you wish to travel frequently but are open to moving to a smaller home perhaps you will not need your investments to generate as much income to achieve your goals. I suggest you work with a good financial advisor who can guide you and your husband to make the right decisions now to ensure you have the income you wish for your retirement. | 10.06.15 @ 23:50
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 17:39
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