So many clients approach me and ask if they will be able to afford to retire. They look at me, with a bit of desperation, and wonder if they truly can quit their job. Can they? The answer is, it’s a mixed bag.
- Some people truly can retire when they want to. They have enough money saved – but more likely, if they’re middle class, they have a pension, social security and maybe a second pension to provide some guaranteed retirement income.
- Others can not retire the way they want to. These people typically only have social security as a floor income stream. In this case, these people likely will have to take a part time job if they really want to leave their current full time position.
How do you determine where you stand?
Those of us who are members of the Retirement Income Industry Association and are trained as Retirement Management Analysts (RMA) believe that your fixed expenses in retirement should be covered by a fixed income “floor.”
How do you figure this out?
Estimate your retirement budget and then determine your fixed retirement income from guaranteed sources such as social security and pensions. If your fixed, guaranteed income sources are not enough to fund your fixed expenses, then you need to consider allocating your investment accounts to fixed income (converting an IRA to an immediate annuity for example to provide stability and longevity protection).
If you need most or all of your investment assets to create this income floor, then you need to seriously consider some kind of employment in retirement to provide a cushion. There is also the risk here that if you need most or all of your retirement assets to provide income, and you are still young, then you will have few to no assets to allocate toward protection against rising expenses in the future.
If you have significant excess financial assets, then you might be ok. Bottom line – it comes down to doing a comprehensive analysis on your income plan for retirement. You may have to face the facts, or maybe enjoy the idea of having to get a part time job in retirement.
Don’t Know What to Do Next?
If you are facing a situation like this and don’t know what to do, give me a call. We have helped people in many situations like this determine their financial security ratios. If you would first like some questions answered give us a call – 781.393.0021 or send us a quick contact and we can go from there. Thanks for stopping by!
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