Retirement Planning
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The New Retiree
Americans are aware of the need for retirement planning; they just seem to be unable to undertake the task by themselves. The evolving emphasis on retirement planning is due to a number of reasons:
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No longer is retirement considered a single event that separates employment from non-employment or work from leisure. More often, retirement is seen as a gradual transition from one life stage to another.
Given these factors, the earlier a person begins to actively and consistently save and invest for retirement, the more funds he or she will be able to accumulate. The power of compound interest coupled with the tax deferral of qualified retirement plans play a huge role in developing a retirement strategy.
Given these factors, the earlier a person begins to actively and consistently save and invest for retirement, the more funds he or she will be able to accumulate. The power of compound interest coupled with the tax deferral of qualified retirement plans play a huge role in developing a retirement strategy.
Factors Impacting Retirement Planning
There are many factors that do—or should—play a role in planning for retirement. All of the following are reasons why developing a sound retirement plan is essential:
There are many factors that do—or should—play a role in planning for retirement. All of the following are reasons why developing a sound retirement plan is essential:
Finding The Amount Needed For Retirement
The whole of retirement planning encompasses much more than the accumulation of assets. However, asset accumulation is the core and, at least initially, the focus of retirement planning. Building assets for retirement certainly incorporates many different products and strategies. But before deciding how a you should fund your retirement or what products should be used for this purpose, you need to have an idea of how much money will be needed. Thus, as is the case with almost any financial service undertaking, the first step is to analyze the need. Once the need is defined, you are in a better position to determine how to address the need.
The whole of retirement planning encompasses much more than the accumulation of assets. However, asset accumulation is the core and, at least initially, the focus of retirement planning. Building assets for retirement certainly incorporates many different products and strategies. But before deciding how a you should fund your retirement or what products should be used for this purpose, you need to have an idea of how much money will be needed. Thus, as is the case with almost any financial service undertaking, the first step is to analyze the need. Once the need is defined, you are in a better position to determine how to address the need.
The approach to determining a retirement income need is fairly straightforward.
Step 1: Establishing Your Plan
Establishing your plan for retirement with regard to:
Step 1: Establishing Your Plan
Establishing your plan for retirement with regard to:
- number of years to retirement
- length of retirement
- rate of inflation
- rate of return on invested assets
Step 2: Estimate Your Yearly Retirement Income Need
Estimate your retirement income need based on a percentage of current earnings or current and projected expenditures. Convert this income need into future dollars, using the assumed rate of inflation for the years leading up to retirement.
Estimate your retirement income need based on a percentage of current earnings or current and projected expenditures. Convert this income need into future dollars, using the assumed rate of inflation for the years leading up to retirement.
Step 3: Apply Social Security and Pensions To The Retirement Income Need
Apply to the future retirement income need the amounts that are estimated to be available from Social Security and pension benefits. Any remaining amounts represent the income needs that must be fulfilled by personal savings and investments.
Apply to the future retirement income need the amounts that are estimated to be available from Social Security and pension benefits. Any remaining amounts represent the income needs that must be fulfilled by personal savings and investments.
Step 4: Convert Annual Retirement Income Need To Total Dollar Amount Saved
Convert the annual retirement income needed into a capital amount based on:
Convert the annual retirement income needed into a capital amount based on:
- the assumed rate of return one will earn during retirement
- the assumed inflation rate
- the duration of the retirement period—This is the amount of money a person should have upon retirement. This amount funds the ongoing income need that depends on personal savings and investments.
Step 5: Calculate The Future Value Of Current Retirement Savings
Calculate the future value of current retirement savings and subtract those amounts from the total capital amount needed at retirement. This sum represents the “yet-to-be-funded” retirement accumulation.
Calculate the future value of current retirement savings and subtract those amounts from the total capital amount needed at retirement. This sum represents the “yet-to-be-funded” retirement accumulation.
Step 6: Calculate Contributions Needed to Accumulate the Retirement Goal
Estimate the annual savings or contributions needed to accumulate the retirement fund goal based on the number of years to retirement and an assumed rate of return on invested assets.
Estimate the annual savings or contributions needed to accumulate the retirement fund goal based on the number of years to retirement and an assumed rate of return on invested assets.
Financial and Saving Strategies:
- Traditional: Retirement Savings Plans
- Covered Assets: Guaranteed Income Plan
- WL Retirement Account: Tax Free Accumulation (note: no taxes on slrp withdrawals)
- Long-Term Care Insurance: Add-On To All Plans
