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Is 70% Enough?  Estimating Retirement Income and Lifestyle Needs

19 April 2016

Many financial advisors will recommend that those clients planning to retire aim for maintaining 70% of their current income during their retirement. Can this lead to clients underestimating their income needs?

Unfortunately, the answer is “yes.” Clients hear “70%,” which sounds substantial. However, clients – and advisors – can fail to take into account the impact – both financial and emotional – of losing 30% of your income.

If you retire with 70% of your income, what spending will need to be cut? What comforts will have to be foregone? Are you prepared for these reductions? Contact us to find out how to determine the amount of retirement income that will keep you and your family in comfort.

One tool to help determine the level of income you will need is a “behavioral stress test.” Take this test before you settle on a goal for your retirement savings – and, by all means, before you retire.

Identify three expense categories which can be cut when you retire. Be as specific as possible as to exactly what regular spending will be eliminated. The cuts should add to 30% of your current income.

What will you cut? Dining out? Travel? Your season’s tickets to the opera, the ballet, or sporting events? Are you comfortable with losing these pleasures?

Taking a behavioral stress test can give you a much better picture of what your retirement will look like – and, taken in advance, can help you plan for the retirement savings you will need to ensure you can continue to spoil your grandchildren, if that is your goal.

No two situations are identical. At RFG, we know that yours is unique. Call us to start building your retirement savings toward the level that is right for you, your family, and your lifestyle.

The above represents general advice. When it comes to planning, one size does not fit all. Rigby Financial Group provides highly individualized, specifically tailored plans for individuals and businesses. Please contact us for advice and assistance in creating a specialized plan that suits your unique situation.

Disclaimer

The information presented here is not specific to any individual’s personal circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.