CNNMoney has posted the Fortune Retirement Guide 2006, which features ten expert answers to the most-often-asked reader questions:
- How much will I need in retirement?
- “The conventional wisdom is that you’ll typically need 70 percent to 85 percent of your working income. But there is no one-size-fits-all answer.”
- Where should I invest now?
- “Over the next five years or so, that’s simple. Unlike building a wardrobe, if you are starting a portfolio, you want to invest in what is out of fashion at the moment. The least-loved sector in all of investingdom right now is a group of names most familiar to you, which is to say large-cap U.S. stocks.” (See the article for a list.)
- What about commodities?
- “It’s late to get into this game … except, maybe, for oil.”
- What if I’m getting close to retirement and don’t have enough?
- “Keep working.” And defer your social security payments, if you can.
- How will I pay for health-care expenses?
- “The typical American worker retiring today without employer health coverage will probably need $200,000 … for expenses not covered by Medicare throughout retirement.” Another reason to keep working, at least part time, says the expert — access to health insurance.
- How much should I worry about inflation?
- “Some – but not too much … inflation over the next decade or so could well be modestly higher than it has been over the last decade.”
- What’s the best way to take money out of my retirement accounts?
- The article gives advice for making certain you retirement accounts are ready for three key points: rollovers, mandatory distribution, and death.
- What’s my best asset mix looking ahead?
- “It’s difficult to generalize here. If you really don’t want to think about it, go with 60 percent in stocks and 40 percent in bonds and cash.”
- Where does my home equity fit into my plan?
- “Your home equity should be the ultimate failsafe. Your savings and pensions will secure your retirement. If something should go wrong, you still have the equity in your home”
- What if I don’t want to retire?
- “Think about, and budget for, the new skills, equipment, or training that you may need to stay relevant in the workforce. Keep professional licenses or other designations current.”
For many Get Rich Slowly readers, retirement is a distant concern. But it’s never too early to start planning.
This article is about Planning, Retirement
2 Responses to “Ten Tough Retirement Questions”
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“The conventional wisdom is that you’ll typically need 70 percent to 85 percent of your working income. But there is no one-size-fits-all answer.”
I really don’t like the “70 percent to 85 percent” numbers; they create a huge misconception about retirement income.
The best way to figure out what you’ll need in retirement is to add up all of your yearly spending right now, subtract any expenses that won’t (or at least shouldn’t) exist in retirement, such as child care expenses, retirement account contributions, and mortgage payments, and add about 10% for some “wiggle room”.
This will result in a figure that is completely reflective of your financial situation, and will allow you to retire with the same standard of living that you have right now.
The best step to take in retirement planning is to eliminate all debt (including mortgages). It is very difficult to retire while still making debt repayments, and it is much easier to retire if your debt retires before you do.
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What if I’m getting close to retirement and don’t have enough?
“Keep working.” And defer your social security payments, if you can.
I remember reading an account written by a person who worked in financial planning at a bank, whose most dreaded client was a person who walked in two weeks before retirement with $50k and no pension, and asked if they were all right. It’s those sort of people (who apparently believe in Magic Retirement Fairies) that make me sad. They ask this question and somehow believe that there is something that no one else has heard about that will come along to help them.
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