The easiest question you will have to answer this year is “Do you want to have financial independence at retirement? If your answer is “no,” please return to your favorite television show and enjoy your day.
According to the Social Security Administration, 15.3% of people age 65 or older have incomes over $75,000 and 35.8% have incomes under $20,000 with the other 49% in-between. If you’re not in the top group yet, consider your sources of retirement income:
– Social Security
– Qualified Plans and IRA’s
– Home Ownership
– Non-Qualified assets
Articles in 2015 will address ways to help you grow your retirement income and will include discussions on securities, annuities, life insurance, hard assets and collectibles.
Other areas such as rental properties, real estate and land development can be serious money-makers, but I’m not qualified to discuss them. Three lifelong friends, Lee Durden, David Hays and Lee Meadors, have considerable expertise in real estate investing.
Any discussion of monthly retirement income has to start with Social Security. A working couple could probably expect $3,500 per month from Social Security at age 66. That leaves another $3,000 of monthly income to produce. If your nest egg totals $600,000, a growth rate of 6% yearly will spin off $3,000 per month and without touching principal, your problem is solved. Unfortunately, a steady growth of 6% for all years after retirement simply won’t happen.
If you withdraw less than what your nest egg is earning, you can safely assume you will not run out of money. If you take out more than you earn, the day will come when you will run out of money.
There will be years when your nest egg will do well and give you double digit returns. Obviously, that’s a plus. What about the years when your earnings are below your desired rate or a year like 2008 when the stock market suffered a near 25% loss? That can greatly damage your piggybank, particularly if you have qualified money subject to required minimum distributions (RMD’s).
THE #1 CONCERN OF SENIORS IS RUNNING OUT OF MONEY.
At age 66, your life expectancy ranges from 16 years for a male to 20 years for a female. Many people are living into their late 80’s and early 90’s. That’s a lot of years to cover and losses in your piggybank can cause some serious problems.
In the coming weeks, I will touch on methods to reduce risk, lessen your expenses and hopefully improve your returns.
Mike Lassiter is a Chartered Life Underwriter and Chartered Financial Consultant. He is a Licensed Insurance Counselor and a Registered Investment Advisor. He can be reached locally at 770-786-2781.