By Oscar Casas, CFP®, CRPC®, MPAS®, ABFP℠
Your retirement dreams rely on more than just having a sizable nest egg. They depend on whether your retirement savings can truly support the lifestyle you want. Even a well-funded account can be impacted by unexpected expenses, shifts in your lifestyle, or market ups and downs.
So how can you know if your retirement savings might last throughout your golden years? It takes more than a simple calculation. You need to take a close look at your goals, projected expenses, current savings, and potential sources of income to create a realistic picture of your financial future.
Consulting with a retirement planning professional can help you navigate this process, giving you confidence that your money can carry you through the retirement you’ve envisioned. Let’s break down the steps to make sure your nest egg stands the test of time.
When Do You Want to Retire?
The first thing to consider when deciding how much money you need to save is your age, both now and in retirement. If you wish to retire early, you have fewer years to save for a longer retirement. Additionally, if you begin receiving Social Security payments prior to reaching full retirement age, you’ll have to account for a lower monthly payout.
The state of the stock market can also influence how much money is required and how long it lasts. Of course, you can’t actually predict the state of the stock market when you retire, but it’s still a wise idea to plan for the possibility of retiring in a bear market.
What Type of Lifestyle Do You Envision for Yourself?
Have you given any thought to the kind of retirement lifestyle you want to live? If you’re certain you want to travel, play golf, or spend time with your grandchildren, consider what that entails and the associated expenses.
For example, if you intend to travel, ask yourself the following questions:
- Do I want to travel abroad or domestically?
- How frequently would I like to travel?
- How would I prefer to travel? (e.g., car, airplane, or RV)
- Where would I like to stay? (e.g., a five-star hotel, an Airbnb, or with family members)
- Do I want my family to join me on the trip? Do I plan to cover their expenses too?
- Can I continue to live at my primary home? If so, who can watch my house and maintain it while I’m traveling?
Even if your dream is simply to spend time with your grandchildren, you should still think through the associated costs. To some, spending time with grandkids means babysitting a few times a week. For others, it means footing the bill for various trips for the entire family.
Either way, plan out the specifics of your vision so you can see how much money is needed to make that dream a reality.
What Is Your Current Debt Level?
Let’s talk about another retirement-income influencer: debt.
There are two significant drawbacks of taking on debt in retirement:
- It reduces your cash flow for non-essential items like housing, travel, and hobbies.
- It can deplete your retirement funds more quickly, meaning you might eventually run out of money or have to change your lifestyle.
If you carry debt, a smart move is to carefully examine your debt and determine how much cash flow you need in retirement to pay for anticipated expenses.
Before they retire, some people prefer to pay off any high-interest consumer debt. Some even go so far as to pay off their auto loans and mortgage.
How Do You Want to Leave a Legacy?
For many people, retirement planning isn’t just about enjoying life today, it’s also about what happens tomorrow. Whether your focus is supporting loved ones, contributing to causes you care about, or transferring a business, thoughtful planning can help direct your wealth where you want it to go.
Strategies may include updating your will, creating or revisiting trusts, reviewing beneficiary designations, or exploring charitable giving options. Considering these steps during retirement planning allows you to align your resources with your values and provide clarity for the next generation.
How Can You Prepare for Inflation and Market Shifts?
Even the best-laid retirement plans can be influenced by forces outside your control, like inflation or market downturns. Rising costs of living can gradually erode purchasing power, while volatility in the markets may affect the longevity of your savings.
Addressing these possibilities means thinking through flexible strategies, such as maintaining a mix of assets, considering investments that may help offset inflation, and stress-testing your plan against different economic scenarios. This kind of preparation can help you adapt over time while keeping your retirement goals in view.
Get Guidance on Retirement Savings With a Planning Professional
Evaluating your retirement savings means taking a close look at your finances, including your income, expenses, debt, lifestyle goals, and long-term plans.
At Tranquility Path Investment Advisors, we focus on your unique objectives, like determining how much you’ll need to enjoy the retirement you envision. By letting us handle the details of your retirement strategy, you can reduce stress and enjoy peace for your future, confident that your money is managed thoughtfully and responsibly.
Schedule a no-obligation conversation or reach us at (732) 856-4324.
