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Why You May Need Help with Retirement Planning
We keep a folder of old articles and ideas for blog topics. While reviewing it recently, we came across a quiz that appeared in the Wall Street Journal way back in June of 2008 titled “Measuring Your Retirement IQ” by Glenn Ruffenach. The quiz was based on a number of different surveys. The results were not surprising.
Here are a few of the questions:
(1) What percentage of the workers surveyed reported that either they or their spouses had tried to calculate how much money they would need for retirement? Answer: Just 47%
(2) What method did they most often say they used to determine how much money they would need for retirement? Answer: They guessed
(3) When asked how much money they would need for retirement, how much did they say they needed? Answer: Most workers said they would need less than $250,000
(4) What percentage of the workers surveyed, whose employers offered 401(k) plans, were saving the maximum amount? Answer: only 7%
What conclusions can one draw from these results? Clearly, few workers are giving any thought to what they will need for a comfortable retirement. Most either haven’t paid any attention to it or have addressed the issue in a very casual manner.
Those not contributing the maximum to their employer’s 401(k) plan are leaving a lot of money on the table, particularly if they are not getting the full employer match. The employer match is essentially a risk-free return. What can be better than that? Those not contributing the maximum are also missing out on the tax-free growth of contributions they are not making.
The average couple receiving Social Security payments, according to the article, receives just $ 2,100 a month ($25,200 a year). If you have less than $ 250,000 saved, according to a commonly used financial planning rule of thumb, you can only plan to safely withdraw 4 percent of your portfolio, adjusted for inflation, each year during retirement. Four percent of $250,000 is $10,000. That would provide a total of just over $ 35,000 a year for retirement, with moderate inflation protection. We expect that many retirees would not be comfortable with only $ 35,000in annual retirement income.
The bottom line is that it appears that many American workers could use some professional advice to help them better prepare for their retirement. Are you one of them? If so, you need to give serious thought to getting some help.
Here are a few of the questions:
(1) What percentage of the workers surveyed reported that either they or their spouses had tried to calculate how much money they would need for retirement? Answer: Just 47%
(2) What method did they most often say they used to determine how much money they would need for retirement? Answer: They guessed
(3) When asked how much money they would need for retirement, how much did they say they needed? Answer: Most workers said they would need less than $250,000
(4) What percentage of the workers surveyed, whose employers offered 401(k) plans, were saving the maximum amount? Answer: only 7%
What conclusions can one draw from these results? Clearly, few workers are giving any thought to what they will need for a comfortable retirement. Most either haven’t paid any attention to it or have addressed the issue in a very casual manner.
Those not contributing the maximum to their employer’s 401(k) plan are leaving a lot of money on the table, particularly if they are not getting the full employer match. The employer match is essentially a risk-free return. What can be better than that? Those not contributing the maximum are also missing out on the tax-free growth of contributions they are not making.
The average couple receiving Social Security payments, according to the article, receives just $ 2,100 a month ($25,200 a year). If you have less than $ 250,000 saved, according to a commonly used financial planning rule of thumb, you can only plan to safely withdraw 4 percent of your portfolio, adjusted for inflation, each year during retirement. Four percent of $250,000 is $10,000. That would provide a total of just over $ 35,000 a year for retirement, with moderate inflation protection. We expect that many retirees would not be comfortable with only $ 35,000in annual retirement income.
The bottom line is that it appears that many American workers could use some professional advice to help them better prepare for their retirement. Are you one of them? If so, you need to give serious thought to getting some help.
posted by David C. Patterson and Erin Preston at
5:50 PM
1 Comments:
Loved your article David .Retirement is one of the most important life events many of us will ever experience. From both a personal and financial perspective, it is necessary make smart plans for it, so the help needed.
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