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Even to your old age and gray hairs I am he, I am he who will sustain you. I have made you and I will carry you; I will sustain you and I will rescue you. (Isaiah 46:4, NIV84)  

 

First…Look ahead and see the evil (Prov. 27:12) and prepare as best as you can, even if you think it is too late!  Take action, don’t ignore your work and duty in preparation for you and your family!

Second…Lean into God!  He is your great provider and sustainer!  He is the one that will be the provider that you need in those days of old age, and gray hair!

 

Questions to Consider

 

1.  How will I know if I have saved enough money to retire?

  • This really depends on many factors. Here are a few. 
    • What is your Monthly Budget in retirement?
    • How much Social Security Income and Pension income do you have?
    • At what age will you retire?
    • If retiring before 65 years old, how will you get health insurance? 
    • Are you carrying debt/mortgage into retirement? 
    • Are you Single or married? If married, is there a large age gap?
    • Do you plan to work part time during retirement?

If you look at your budget needs then consider all sources of guaranteed income, like SSI and Pensions [note:pensions are not guaranteed by the US government]. What is the difference between your budget needs and automatic income?

 

2.  How do I predict what my retirement budget will be?

  • 80% Rule of Thumb: Many experts suggest that you should shoot for a retirement income of roughly 80% of your current income level. For younger folks (in their 20’s and 30’s), this recommendation may not be very helpful. But by the time you reach your 40’s and 50’s, the recommendation starts to make more sense. Note that higher income earners generally do not need to replace 80% of their income to survive. In my experience, once in retirement, many typically spend between 35% and 50% of their pre-retirement income. 
  • Modified Living Expense: Once you are within 10 to 5 years from your projected retirement date, you throw out the notion of 80% and focus on your actual living expenses. Subtract any retirement savings and work related expenses and you’re getting closer to a helpful number. 

 

3.  At what age should I retire?

  • While choosing a retirement age is a very personal choice, it is often impacted by several financial factors.
    • When do you start collecting Social Security?
    • How will you pay for health insurance?
    • Do you have enough savings to fill in the income gap?
  • Super Early Retirement – Pre 62:
    • This often requires setting up a special distribution from an IRA called a 72(t) Distribution. By doing this, you can avoid the penalty of taking an early distribution from an IRA. You lock yourself into a future plan of withdrawals that you must take regardless of whether you need it or not. We do not generally encourage 72(t) distribution plans as they are inflexible and can have unintended consequences. Be sure to consult your tax advisor before making any plans for a 72I(t) distribution.
    • You will need to plan for handling health insurance between the time you retire until you reach 65 when you can apply for medicare. 
  • Early Retirement – Age 62 +: 
    • You may consider retiring earlier if you physically and/or mentally can’t keep up with the demands of the job. I caution you about taking retirement too early. Consider what is in the best interest of your spouse. Taking early Social Security may leave the surviving spouse with less income to handle the inevitable increase of the cost of living over the years. 
    • There are income limits – In 2021, the earnings limit for early claimants is $18,960. (The figure is adjusted annually based on national changes in average wages.) You lose $1 in benefits for every $2 in earnings above that amount. If you are on Social Security for the whole year and make $30,000 from work, you are $11,040 over the limit and lose $5,520 in benefits. It may not make sense to collect Social Security early while still working a full time job.
  • Full Retirement – 67: 
    • Once you reach Full Retirement Age, you are able to work and earn as much income as you can and experience no reduction in benefits.
    • The Spousal benefit (the 50% of your benefit which your spouse may be eligible to collect) stops growing at Full Retirement Age. If you continue to defer starting Social Security, your spouse’s benefit will not grow.
  • Late Retirement – 70 +: 
    • Social Security benefits top out at age 70. If you have deferred starting Social Security until now, it would be wise to start collecting at this point.

 

4.  How much of my income should I save for retirement

  •  Ideally, you should shoot to save 10% of your income toward retirement.  For some listeners, this seems like an unattainable goal. If you can’t do 10%, you should start somewhere. Here are some easy ways to get started. 
    • Start adding to your work sponsored retirement account (401k, 403b). Put in as much as you can to get the employer match (if offered)
    • Setup your own Individual Retirement Account (IRA) or Roth IRA and start adding $50 to $100 every month.
    • Each time you get a pay raise, consider increasing your savings rate as well.

 

5.  What vehicles or ways can one save for retirement?

  • Work sponsored retirement plans, such as a 401(k) or 403(b). If applicable, be sure to get the full employer match.
  • Take advantages of Roth options (inside or outside of a 401(k)).
  • Consider other options, such as Joint accounts, Real Estate, Single Stocks, etc. Speak to a financial professional before making big financial decisions.

 

Don’t focus on how much you need…focus on how much you can save!

  • So many people hear that they need “X million” dollars in order to retire and they feel that at their rate they will never get there. While you may never reach a million in retirement savings, who cares! Don’t focus on the impossibility of the mission, focus on what you are able to do with your current income.  Don’t let the retirement needs of others deter you from making progress toward your own goals. 
  • Your income is likely to increase as you progress through your career. Likewise, as you pay off your debts (seeking to become debt free in retirement) you may find that you simply don’t need all your current income to be replaced in retirement. 
  • Don’t forget the power of compound interest. 
  • Your current income is NOT your future need.

 

So…What is my need?

Consider signing up for a free stewardship review. You would benefit from a Stewardship Review:

  1. If you need help figuring out how much income you will need to reach your goals 
  2. If you need to make sure your investments are on track to reach your goals. 
  3. Need to create a spending plan (budget) to help you better manage your resources today so that you will eventually be able to retire.

 

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The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.  Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

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