Approaching Retirement? Can You Answer These 6 Questions? (2024)

FAQs

What are the 6 stages of retirement? ›

The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4 percent of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years.

50 - Consider allocating no more than 50 percent of take-home pay to essential expenses. 15 - Try to save 15 percent of pretax income (including employer contributions) for retirement. 5 - Save for the unexpected by keeping 5 percent of take-home pay in short-term savings for unplanned expenses.

The 50 – 70 rule is a quick estimate of how much you could spend during your retirement. It suggests that you should aim for an annual income that is between 50% and 70% of your working income.

Here's how much you would need to save in to comfortably retire: Current retirement savings balance: $10,000. Desired annual income (after taxes) during each year of retirement: $50,000. Annual Social Security benefit: $21,379.56 (given that the average social security benefit is $1,781.63)

Average Monthly Retirement Income

According to data from the BLS, average incomes in 2021 after taxes were as follows for older households: 65-74 years: $59,872 per year or $4,989 per month.

What should I say when I retire? ›

1. Having No Retirement Plan. Not starting the retirement-planning process is one of the biggest retirement mistakes you can make. You should determine what you want your future to look like, as well as how much money you can realistically set aside.

Among the biggest mistakes retirees make is not adjusting their expenses to their new budget in retirement. Those who have worked for many years need to realize that dining out, clothing and entertainment expenses should be reduced because they are no longer earning the same amount of money as they were while working.

The most frequently cited retirement fear is “outliving my savings.” Fifty two percent of all workers (young and old) say that they fear outliving their savings and investments, and 42% are concerned that they will not be able to meet the basic financial needs of their household.

The (Overly) Simple Math Behind the “$1000/Month Rule”

The math behind the $1000-a-month rule is simple. If you take 5% of a $240,000 retirement nest egg each year, that works out to $12,000/year, which, divided into 12 months, gives you $1000 each month. Painless, right?

A typical 90/10 principle is applied when an investor leverages short-term treasury bills to build a fixed income component portfolio using 10% of their earnings. The investor then channels the remaining 90% into higher risk but relatively affordable index funds.

The 4% rule for retirement is a guideline that suggests withdrawing 4% of your savings each year in order to have a 95% chance of not running out of money. This amount is adjusted for inflation, so you can live comfortably in retirement without fear of outliving your money.

Therefore, as you consider ways you can support your clients as they prepare for retirement, determine to be proactive in nurturing their resiliency, resourcefulness, and renaissance spirit—three qualities that will help them to make the very most of every age and stage of life.

The 70-80% Spending Rule

Retirement advisors at Fifth Third Securities generally agree that a good rule of thumb for estimating your future spending is to multiply your current monthly spending by 70-80%.

What is the 80 20 retirement rule? ›

An 80/20 retirement plan is a type of retirement plan where you split your retirement savings/ investment in a ratio of 80 to 20 percent, with 80% accounting for low-risk investments and 20% accounting for high-growth stocks.

In most cases, you will have to wait until age 66 and four months to collect enough Social Security for a stable retirement. If you want to retire early, you will have to find a way to replace your income during that six-year period. In most cases $300,000 is simply not enough money on which to retire early.

The quick answer is “yes”! With some planning, you can retire at 60 with $500k. Remember, however, that your lifestyle will significantly affect how long your savings will last.

One rule of thumb is that you'll need 70% of your pre-retirement yearly salary to live comfortably. That might be enough if you've paid off your mortgage and are in excellent health when you kiss the office good-bye.

However, according to the Federal Reserve's “Report on the Economic Well-Being of U.S. Households in 2019,” 60% of Americans either do not realize if they're on track or are unsure if they're on track. The Federal Reserve's most recent data reveals that the average American has $65,000 in retirement savings.

Average Social Security retirement benefits in 2023

Average payments for all retirees enrolled in the Social Security program increased to approximately $1,827, according to the Social Security Administration (SSA).

Yes. There is nothing that precludes you from getting both a pension and Social Security benefits. But there are some types of pensions that can reduce Social Security payments. Join our fight to protect Social Security.

To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.

Among those looking ahead to retirement, many expect to step away from work at age 65, according to the 2023 Retirement Confidence Survey. Although 65 is the anticipated median retirement age, workers report retiring at a median age of 62, the survey found.

What are the best years to retire? ›

67-70 – During this age range, your Social Security benefit, if you haven't already taken it, will increase by 8% for each year you delay taking it until you turn 70.

The normal retirement age is typically 65 or 66 for most people; this is when you can begin drawing your full Social Security retirement benefit. It could make sense to retire earlier or later, however, depending on your financial situation, needs and goals.

“It's been an honor and a privilege to work with you for the last 23 years. I think of you not only as a boss but a friend as well.” “When you love what you do, work doesn't feel like work. Thank you for making me happy to show up in this office every day for the last two decades.”

If you find yourself in this situation, consider the “Rule of Three:” When you have an unexpected windfall, put 1/3 of the windfall towards paying down debt, 1/3 towards long-term saving and investing, and the remaining 1/3 towards something rewarding or fun. Let's take each in turn and talk about the benefits.

Is it better to retire at the beginning or end of the month? Retiring on the last day of the month is typically the best option. This enables you to collect all your paychecks during this period. You can also benefit from collecting any holiday pay that might be offered by your employer for that month.

The last five years before you retire may be a critical point of time—at least when it comes to retirement planning. That's because you must determine whether you truly can afford to quit work within that period of time.

The Bottom Line

The worst retirement mistakes are probably not planning to retire at all, failing to take full advantage of retirement savings plans, mismanaging Social Security, making poor investment decisions and neglecting the non-financial side of retirement.

What not to do when you retire? ›

The happiest retirees know very well how to travel, play and explore, and they wholeheartedly engage in three or more hobbies on a regular basis, says Moss. “Curiosity may have killed the cat, but a lack of curiosity kills the happy retiree,” he says. Keep in mind, it doesn't really matter what your interests are.

Diversifying Investment Vehicles

Most retirees never regret planning ahead for retirement to meet their goals and investing early to reap the benefits of compound interest. Another money move retirees seldom regret is diversifying their savings and investment vehicles.

The first is the rule of 25: You should have 25 times your planned annual spending saved before you retire. That means that if you plan to spend $30,000 during your first year in retirement, you should have $750,000 invested when you walk away from your desk.

Working benefits your finances.

The most obvious problem with retirement is that you must keep spending money even though you're no longer earning it. You still have to cover living expenses, such as housing, healthcare, and food costs, which for over half of households in retirement, is impossible.

Retirement anxiety is an emotion of concern or worry, experienced by people yet to retire, about the prospect of retirement. Examples include concerns about how they'll fill their time, financial worries and feeling a loss of identity.

In the first year of retirement, you can withdraw up to 4% of your portfolio's value. If you have $1 million saved for retirement, for example, you could spend $40,000 in the first year of retirement following the 4% rule. Beginning in year two of retirement, you adjust this amount by the rate of inflation.

As a result, retirement experts have downgraded the Four Percent Rule to the Three Percent Rule. In short, to enjoy a reasonably high expectation of not running out of money prior to death, you should never withdraw more than three percent of your initial portfolio value in retirement.

According to this principle, individuals should hold a percentage of stocks equal to 100 minus their age. So, for a typical 60-year-old, 40% of the portfolio should be equities. The rest would comprise high-grade bonds, government debt, and other relatively safe assets.

According to data from the BLS, average incomes in 2021 after taxes were as follows for older households: 65-74 years: $59,872 per year or $4,989 per month. 75 and older: $43,217 per year or $3,601 per month.

Which is the biggest expense for most retirees? ›

Housing. Housing expenses—which include mortgage, rent, property tax, insurance, maintenance and repair costs—remained the largest expense for retirees.

What is the 7 percent rule? The 7 percent rule is a retirement planning guideline that suggests you can comfortably withdraw 7 percent of your retirement savings annually without running out of money.

If you have multiple income streams, a detailed spending plan and keep extra expenses to a minimum, you can retire at 55 on $2 million. However, because each retiree's circ*mstances are unique, it's essential to define your income and expenses, then run the numbers to ensure retiring at 55 is realistic.

It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.

By age 50, you should have six times your salary in an account. By age 60, you should have eight times your salary working for you. By age 67, your total savings total goal is 10 times the amount of your current annual salary. So, for example, if you're earning $75,000 per year, you should have $750,000 saved.

For something as important as your financial future, it's important to work with a financial professional. Everything in the plan should be coordinated — taxes, Social Security, income planning and investments.