VOL. 129 | NO. 153 | Thursday, August 7, 2014
Rays of Wisdom
Dana and Ray Brandon
How Much Should I Save for Retirement?
By Ray and Dana Brandon
Ray’s take: Saving for retirement. It’s something we are all aware of and working on regularly. But how much do you need to save for retirement?
That is the quintessential question everyone asks. And the answer is not so clear. It depends. Truly.
There are three key factors in how much you will need: When do you plan to retire? How much will you need at the time? And how much risk can you tolerate until then and afterwards?
The interaction of the three can be complex, but answering and prioritizing those questions will take you pretty far down the road of retirement planning.
With regard to the first question, we prefer not to use the “R” word. We like the concept of “financial independence.” That way you can continue to work if you choose, but you just don’t have to any longer. It amazes me how much our clients suddenly enjoy what they are doing when they no longer have to do it!
Whatever your answer to these questions, and others, it’s important to have a dynamic approach to saving that accommodates changing retirement needs and savings capacity. When making your plans, using at a minimum age 95 as your end-of-life age when calculating how much you will need is a good idea. You may not live that long, but with health care and technological advances, who can say how long we may live? Any way you look at it, you want to avoid being old and broke.
Dana’s take: Ray has been a financial planner for over 30 years and one thing he has learned is that people underestimate how much they will want to spend in their golden years. When I think of retirement, I picture living in a little cottage out of “Hansel and Gretel,” wearing a calico apron and baking cookies. Maybe I need to update my vision because I live near many people in their 80s who live in big homes, drive nice cars and travel more than we do.
The cost of assisted living is another shocker. The buy-in can be a half a million dollars – plus a monthly fee that is comparable to renting a nice home. Social Security probably won’t cover all that.
Taking the steps to prepare for decades of financial independence is painful. Most of us don’t have that kind of discipline, alone. Start the conversation now and create a sustainable plan that will keep working when you’re ready to work less.
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at firstname.lastname@example.org.