With pensions virtually gone and Social Security benefits likely to diminish, you have to look elsewhere for income. Also, with most recent retirees finding that their spending in retirement declines less than expected, there’s greater pressure on your personal plan to fulfill your retirement needs.
People are living longer, healthier lives nowadays. Your retirement could last 25 years or more, which magnifies the importance of your savings. A diversified plan can help you meet both income and growth needs. Sources of income like annuities can help lessen your dependence on Social Security, while equities and mutual funds can help you keep pace with inflation.
If you wonder how much of my current income will you need to maintain your standard of living in retirement, the old rule was you needed 70% of your current income to maintain your standard of living. However, when considering inflation and taxes this is no longer the case. Also, adding travel, a second home, or a new business venture to the mix can significantly increase costs throughout your retirement.
If you want to outpace inflation while minimizing the risk of market volatility, your income strategy should account for how much of your portfolio is in equities, based on your risk tolerance. This will, in turn, help determine what other investments and financial products to include in your overall portfolio. A diversified plan that meets both growth and income needs can help you manage inflation, as well as shifts in the market.
Healthcare costs are increasing for everyone, but especially for retirees. Medicare and Medicaid can help somewhat, but may not be the entire solution. Your retirement plan should prepare you to address day-to-day healthcare, medical emergencies, and the possibility of long-term care.
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