How to Tell Whether You Have Enough Money to Retire

How to Tell Whether You Have Enough Money to Retire

“I’m not sure I have enough saved up to retire.”

“How can I know for sure my savings will last after I stop working?”

“I”m concerned I’ll spend through my savings too fast and run out of money when I’m 80.”

These are a few common phrases I hear from people who are approaching retirement.  Many people I speak with in the their mid 50s and early 60s these days have saved diligently for years for their own retirement.  But now as they approach the transition from accumulating wealth to spending their savings, the question of whether they’ve saved enough becomes extremely important.

Plus, when you mix in longer life expectancies, rising health care costs, and expensive stock and bond markets, there’s a lot of uncertainty surrounding the issue.

So in today’s post, I’ll cover some of the leading ways you can determine whether you have enough saved up to stop working.  Without putting you and your family’s future at risk, that is.

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Does the 4% Rule Still Work

Does the 4% Rule Still Work?

Recently I had a client come into my office who was concerned about his and wife’s and his retirement.

This client works at a company that sponsors a 401(k), but his wife works for the state and will receive a pension after retiring.  My client was concerned that his 401(k) savings wouldn’t be enough to cover their annual living expenses, after accounting for their pension and social security benefits.

“Do we need to save more?  I’m not sure we could.  We’ve got Danny in college now and our daughter right behind him.  I’m just worried we’ll zero out our savings and have to cut back on spending.”

We talked about how much he was saving in his 401(k), and how much that might amount to in 15 years when they planned to retire.  But really, the crux of my client’s concern was that he’d spend through his savings too fast after they stopped working.

In his financial plan, we’d originally planned for withdrawals of 3.5% of his nest egg per year.  Whatever was left over after he and his wife passed would go to the kids.

“I just think that 3.5% might be too much.  I’ve been reading some pretty negative things about the 4% rule recently.  3.5% just seems too close for comfort.  What’s your take on it?”

 

 

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