Welcome to our new series, “Questions for a Successful Retirement!” In the coming months, we will share important items you should consider before retiring and explain why they matter. The first question you should answer to retire successfully is “How much income will you need every month to cover your monthly expenses in retirement?” WHY BUDGETING MATTERS You likely already know this question is important, and maybe you’ve even worked with our team to answer it. But you’d be surprised how many people fail to take the same steps! According to The Motley Fool, 30% of Americans head into retirement without any savings — and of the 70% who do have funds, in our experience, few create budgets. Instead, they live each day of retirement afraid of running out of money, watching their bank accounts empty. You can avoid that fate with smart budgeting. If you already have a budget in place, please share the following steps with your friends and family approaching retirement. If you don’t, follow the steps yourself to achieve peace of mind! Retirement Question No. 1 How Much Will You Spend in Retirement?
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RETIREMENT BUDGETING BASICS To begin budgeting for retirement, add up all your current monthly expenses. You can do this easily by looking at your checking account and credit card statements. From there, group your expenses into categories like housing, transportation, utilities, groceries and restaurants, entertainment, gifting, medical expenses, and taxes. Identify how much you spend in these areas right now. Look at data for an entire year, then find averages for each category and overall monthly spending. Next, adjust your category numbers to match what you expect to spend in retirement and run the math again. Keep in mind that when you retire, some costs will drop (e.g., your housing cost will go down if you pay off your home) while some will increase (e.g., you will need to save more for taxes because income tax won’t be automatically deducted from your paychecks). Assuming the results are doable on your planned retirement income, this will give you a starting point for your retirement budget — the essential foundation of your lifestyle in retirement! Simple? Maybe, but when projecting expenses over a long period of time, such as a retirement, there can be many variables, such as inflation, increased health care costs, tax bracket changes, and more. Most find they need professional help to create effective projections. Estimating and planning for such living expenses is a fundamental part of our wealth management system. Our advanced software helps collect your data, budget, account for variables, and more. Part of that software suite is available right now! Visit our website or follow the QR code on this page to get started, and call our office to unlock even more advanced projections.
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