Between 2019 and Q3 of 2020, approximately 60 million baby boomers retired, a 1.1 million increment from 25.4 million to 28.5 million. This increment was propelled due to unforeseen circumstances, in this case, Covid-19.
Your journey to retirement may hit such eventualities which may snag your retirement plan. Given that you may need 80% of your pre-retirement income, what factors should you look into to ensure you are on course to a stress-free retirement life?
7 Important Factors To Consider While Planning Your Retirement
With the retirement rate being 65 years, the average spending is $49,441and an average saving of $23,000 and $76,000 for women and men. These factors are critical at ensuring you have enough bank balance to cater for you and your family when you retire.
- Your Mortality
How long you will live after retirement should influence your plan. On average, most people live between 18 and 25.5 years after retirement for men and women, respectively. However, factoring in the mortality of your parents and grandparents will give you a rough idea of how long you might get to live if you’re fit and healthy.
This works in determining how long you’ll need your money, given that 27 years is the average age people start saving for retirement.
- The Amount You’ll Spend
The 80% rule of the thumb is concocted from the mere fact that you do not spend cash on things like commuting, new clothes, dry cleaning, a saving plan, and tax exemptions. So, if you factor in your social security income, your retirement expenditure should be 80% of your pre-retirement expenses.
- Amount You’ll Earn From Your Savings
A historical overview of the performance of the assets will enable you to predict the income you’ll get from bills, bonds, or stocks. Since 1926, nearly a century ago, the stocks, bonds, and treasury bills returns have been capped at 10.29%, 5.33%, and 3% returns a year, respectively.
Investment diversity is preferred, especially a ratio of 60:40 in stock and bonds with an average return of 8.84%. Diversifying your portfolio shields you from market eventualities as the stock market has had its share of ups and downs.
- Yearly Withdrawal Amount From Your Saving/Investments
Having a 50:50 percentage ratio in stock and bonds investments will give you a leeway to withdraw 4% of your portfolio with minimal risk of your accounts running dry. You’ll delay cashing in your social security benefits with sizable savings, which has an 8% increase yearly between age 65 and 70.
Ensure that you pay off your debts early enough to avoid having to pick off your retirement account when the time comes. It’s advisable to be clear of any due credit and loan when closing into your retirement.
- A Side Income
The Covid-19 restrictions have opened us up to working from home–embracing this new culture will enable you to not only find something to keep you busy but earn a sustainable income.
Or setting up a business early on in your career is a viable option that will guarantee a stress-free retirement life.
- Always Review Your Plan
A consistent salary income is a safety net that should be left if you’re sure that you’ve got a rock-solid retirement plan. It’s prudent to have a financial advisor to analyze your current income needs and your available assets. They’ll be able to give you reasonable 20-30 years growth projects in line with your investments.
Factors like the cost of living, medical expenses, inflation, and social security will enable a financial advisor to curate financial goals and a retirement plan tailor-made for you.
The pace of Boomer retirements has accelerated in the past year
The pace of Boomer retirements has accelerated in the past year (2020). Available at: https://www.pewresearch.org/fact-tank/2020/11/09/the-pace-of-boomer-retirements-has-accelerated-in-the-past-year/ (Accessed: 11 July 2021).
Waggoner, J. (2021) How Much Money Do You Need to Retire, AARP. Available at: https://www.aarp.org/retirement/planning-for-retirement/info-2020/how-much-money-do-you-need-to-retire.html (Accessed: 11 July 2021).
50 Essential Retirement Statistics for 2020 | Demographics, Savings
50 Essential Retirement Statistics for 2020 | Demographics, Savings (2021). Available at: https://www.annuity.org/retirement/retirement-statistics/ (Accessed: 11 July 2021).
Waggoner, J. (2021) 1929 Stock Market Crash: Top Takeaways for Today, AARP. Available at: https://www.aarp.org/money/investing/info-2019/1929-stock-market-crash-takeaways.html (Accessed: 11 July 2021).
I am a CFP® (Certified Financial Planner).
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