Managing Wealth in Retirement
According to a 2005 study, more than half of new retirees
experienced a significant growth of their total wealth between
1992 and 2002.1
But how much money is enough? Considering that your
retirement could easily last three decades or more, it's
important to be prepared for the long haul.
Calculate the Cost
The first step is to make realistic assumptions about the
cost of retirement. Half of today's workers believe they will be
able to survive on 70 percent or less of their pre-retirement
income. But more than half of today's retirees say they need 95
percent or more of their previous salary.2
The discrepancy might be due in part to higher-than-expected
health-care expenses, which are difficult to predict with any
certainty. For the past several years, health-care costs have
far outpaced general inflation.
It's critical for retirees to take inflation into account. As
the accompanying chart shows, inflation can significantly affect
the amount of money retirees need to withdraw each year in order
to maintain their standard of living.
Take Control
Once you have an idea of what retirement costs, you can
determine where you stand in terms of savings and how much you
can feasibly withdraw each month. This is a complex task that
requires careful consideration of a number of variables,
including expected earnings and inflation.
Estimating how much you can spend each month will give you
added control over the depletion of your savings. If you suffer
losses or gains to your portfolio, your withdrawals can be
adjusted accordingly.
After examining your savings and future expenses, you might
find that your portfolio needs some modification – either to
better safeguard what you have or to help bolster your savings
to meet oncoming needs. Allocating assets appropriately for your
Financial situation in retirement can help you preserve your
purchasing power and manage the ups and downs of the Financial
markets.
Everyone has sunny visions of what retirement should be.
Careful preparation can help increase your chances of living out
those visions.
From:
David Waters
Phone: 215.875.8790
1) Employee Benefit Research
Institute, 2005
2) 2006 Retirement Confidence Survey, Employee Benefit Research
Institute
