Retirement now

23. April 2012 09:06 by Administrator in Retirement , Retirement Planning  //  Tags:   //   Comments (0)

 

Well, it starts with a somewhat philosophical question – what is Retirement for you?  Is it stop working, is it working less and spending more time with your love ones, maybe it's just stop doing what you have to do for a living and start doing what you really want but never though you can afford it?

The financial answer for the desire to retire now obviously depends on the answer to this question.  We will analyze the amount of money you will have from various sources including rental property, social security, pension and payroll (in case we would like to continue working but less) and compare this "income" with your living expenses needs.  If you have enough to cover your needs you are in a good position to retire.  If there is a gap (we call it your "retirement gap" we will expect your financial portfolio to cover the gap.  Here we will analyze if your portfolio is large enough compare with this gap.  If it is you are good to go.  Otherwise we will need to discuss the various alternative actions you can take (that includes some compromises on needs, length of full/partial employment, place, etc.,) and define an action plan tailored for you.

As a general rule of thumb you need a portfolio that is 10-15x your unfunded living expenses in order to stop working.  Your “unfunded” living expenses are the “gap” between your projected retirement income and expenses.  Retirement income is income from sources other than work and your portfolio.

We use a range of 10-15X because so many factors impact the size of the portfolio needed.  Your marital status, life expectancy at retirement, Social Security replacement ratio and marginal tax bracket are just a few.  If you are married you may get two Social Security checks instead of one.  If you retire at age 55 your portfolio will have to last 15 years longer than if you retire at age 70.  If your pre-retirement income was $20,000/year, you can expect Social Security to replace 69% of your income. If your income was $90,000/year you can expect Social Security to replace only 36%.  You need a bigger portfolio in the 40% tax bracket than in the 0% tax bracket.

If you have questions about financial planning or implementing strategies that can help you grow your portfolio to your retirement level, please visit www.planandact.com and start by taking your free financial assessment today.

 

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