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Retirement Planning

Build Your Nest Egg

Americans dream about retirement.  They wonder how they will spend their Golden Years: Spoiling their grandchildren with gifts?  Sailing around the world on a cruise liner?  Maybe learning how to fly an airplane, or contributing to a charitable cause?  What are your dreams?

Have you recently retired?  Are you facing retirement?  If so, you should be aware that there is good news and bad news when it comes to retiring in the new millennium.

Let’s take a look at the good news first.  Today, people are living longer than ever before.  In prior generations, Americans asked themselves, “Am I going to live long enough to enjoy my retirement?  With the average life expectancy at just over 70 years, people who stopped working at the customary age of 65 and had five years of retirement considered themselves lucky.*

Today, life expectancy has risen.  Those retiring at the age 65 can enjoy a retirement that spans 18 years on average, and often much longer.*

*Source:  United States Department of Health and Human Services report “Health, United States, 2004”

Will My Nest Egg Be Enough?

With a longer life expectancy rate, however, retirement becomes a financial challenge. Increases in the cost of living gradually erode the purchasing power or retirement nest eggs.

Will I Outlive My Money?

Today, the retirement question many Americans are asking themselves is a sobering one: Will I outlive my money?  Although the U.S. is the world’s wealthiest country, there is reason to worry about your financial state after retirement.

The retirement income of Americans has come, traditionally, from three primary sources: Social Security, company-sponsored pension or profit-sharing plans, and personal savings.  Past generations were content to set aside only a modest nest egg – secure in their faith that “the government” and “the company” would provide the lion’s share of their needs.

That strategy may have worker for your parents or grandparents.  You, however, will have to be more self-reliant.

Here’s Why?

There is no guarantee that Social Security will even be in force when you retire.  If it is, the benefits will likely fall short of your needs.  As for pensions, fewer and fewer American workers stay at the same companies long enough to earn this benefit.  Most pension plans, moreover, pay only a small percent of pre-retirement wages.

How Much Will I Need?

To quickly estimate the level of personal savings you may need for retirement, take this simple test:

  1. Calculate how much income you think you will need at retirement.  (Experts say most people require about 75 percent of pre-retirement income to maintain your pre-retirement standard of living.)
  2. List your anticipated sources of retirement income.  Estimate how much you can depend on each source to contribute to your total income; add these numbers together.
  3. Subtract the second answer from the first.  This is the gap between goal and reality that you should begin closing today-regardless of your age or current income level.

Launching Your Financial Program

When the average retirement was relatively brief, retirees could be content to simply maximize the income generated by their savings.  In the New Millennium, however, retirees who want to protect their nest eggs are asking, “How can I maximize the purchasing power of my investments so that it will not be depleted by the ravages of inflation over time?

The Answer Is:

Generally, you should develop a plan with an advisor whose clients are their main focus.  How tragic would it be if your lifestyle only diminished as your retirement continued?  Don’t let it!

Decide today to develop a relationship with an experienced advisor.  It’s your chance to turn the “bad news” of retirement into the “good news” of planning your financial future.  Let John help you establish a Retirement Plan.  He can review your current financial situation, help you establish your retirement goals, and develop a written plan to take you from where you are now to the journey toward your retirement goals.