Saving strategies to help you prepare for retirement early.
Aug. 20, 2015 Whitepaper

Determine How Much You Need For Retirement

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Retirement should be something to look forward to; however, preparing for retirement is a stressful concept for many individuals.

According to the Center for American Progress, one-third of Americans have no retirement savings. Of those who have saved for retirement, many will face shortfalls due to increased life expectancies, rising medical expenses and the uncertainty of Social Security.

In order to prepare for retirement, it is important to have an idea of the amount of savings needed, establish a plan and save consistently. The following steps can help you determine how much you may need to save for retirement:

Decide the age at which you wish to retire

It is important to estimate the number of years you will likely need to support yourself (and potentially others) in retirement. The length of your retirement will depend on how early you retire and how long you live in retirement. While it is impossible to predict our own life expectancies, we can make an educated guess based on family history, health and actuarial averages.

Determine the amount of income needed for retirement

Begin by imagining your ideal retirement. What will you do? Your retirement dreams may consist of purchasing a second home, travelling, spending time with family or making charitable contributions. Health care costs and post-retirement living expenses should also be taken into consideration, as well as expenses associated with maintaining your desired lifestyle.

A general guideline is to plan on spending 80% of your current salary per year during retirement.

Consider the impact of inflation and investment performance

Inflation will impact your retirement savings. We generally recommend factoring in a 4 percent annual inflation rate when making retirement projections to help protect purchasing power.

The higher the rate of return earned by your investments, the less you will need to save because your investments will be earning money for you. On the flip side, if your investments are not performing well, you will need to save more. Your rate of return may vary based on you asset allocation, your level of diversification and market conditions. Higher risk investments have the potential to produce higher rates of return, but are also more volatile on the downside.

Add up your savings

It is important to consider the total amount of savings you already have in place, as that money could potentially be used to fund your retirement.

Obtain the value of your company pension plan, if you have one

Future pension payments may decrease the amount you need to save.

Estimate the value of your Social Security benefit

If you have paid into Social Security, you may entitled to some benefit. You can check the value of your benefit by visiting the Social Security Administration’s website.

Once you have estimated the dollar value needed to fund your retirement goals, you can begin to develop a plan for saving. The experienced wealth advisors at Kaiser Hoffman are well versed in helping clients plan for retirement. For additional information and help with retirement planning, please contact us.

Sources:
https://www.americanprogress.org/issues/economy/report/2015/01/26/105394/ the-reality-of-the-retirement-crisis/
http://www.investopedia.com/university/retirement/retirement2.asp
https://www.fidelity.com/viewpoints/retirement/8X-retirement-savings

This document is for informational use only. Nothing in this publication is intended to constitute legal, tax, or investment advice. There is no guarantee that any claims made will come to pass. The information contained herein has been obtained from sources believed to be reliable, but Kaiser Hoffman does not warrant the accuracy of the information. Consult a financial, tax or legal professional for specific information related to your own situation.

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