Retirement Planning Spring 2022

The answers to 4 key retirement planning questions

1. How much should I save each year for retirement? Aim to save at least 15% of your income annually—start as soon as you can.

2. How much do I need to save for retirement? Save 10x your income by age 67.

3. What will my savings cover in retirement? Plan for your savings to provide 45% of your pretax, preretirement income.

4. How can I make my retirement savings last? Withdraw no more than 4% to 5% from savings yearly, with adjustments for inflation.

Contact Aspetuck Financial Management if you would like to discuss your retirement planning. We can review a checklist of items you must address in order to retire on time and once.

The answers to common retirement questions involve figuring out estimates on how much you need to retire based on a yearly savings, retirement funding at certain ages, an income replacement rate, a rate of return rate on your investments, and a prudent withdrawal rate.

Life has many ups and downs. Your circumstances will change overtime affecting your estimates and plan. Even so, you still need to set goals, plan, and estimate where you stand. Then take action that brings you closer to goal achievement.

The following answers assume a retirement age of 67 (full Social Security benefits age for those born in 1960 or later).

• How much do I need to invest for retirement? That depends on your retirement savings goal. One simple way of estimating and assessing if you’re on track is with an age-based savings factors. These are savings amounts expressed as multiples of your current income. For example, aim to save 1X your current income by age 30, 3x by age 40, 6x by 50, 8x by 60, and 10x by 67.

• How much should I invest each year for retirement? For a higher level of confidence that you can maintain your lifestyle in retirement, aim to save at least 15% of your pre-tax income a year over the course of your working life.

• What will my retirement funds cover in retirement? Your retirement accounts should be enough to replace at least 45% of your preretirement income, after accounting for Social Security.

• How can I make my retirement funds last? By not over withdrawing from your retirement accounts. Withdraw too much and you risk running out of money. Generally, limit annual withdrawals to 4% to 5% of your initial retirement savings. Obviously, sound retirement account management results will allow you to withdraw more and extend the life your retirement savings!

The age at which you choose to retire has a big impact on how much income you need to save, and withdrawal rates. The average retirement age in America is 62, which is also the age at which you can start claiming Social Security benefits. But postponing claiming can increase your monthly benefit by 8% every year you delay between age 62 and 70. Delaying can also extend the period over which your retirement savings can grow and reduce the number of years to be funded by those savings. Of course, your goals and circumstances may be different, which is why you should consider working with a dedicated Aspetuck Financial Investment Advisor to build a personalized plan that fits with your circumstances.