How much do I need to retire? Senior financial advisors are weighing in
There are some simple rules like Save 10 times your income By retirement age, though, experts recommend using a retirement calculator to get a more accurate picture of your retirement number.
However, the old rules may not apply.
“There is not necessarily a one-size-fits-all solution,” said Christopher Schreiner, certified financial planner and chief operating officer of Reston, Virginia. Mason Investment Consulting Services, ranked 13th in CNBC 2021 FA 100 roster.
“Spending will always be the most important variable,” he told retirees. “The perfect investment solution cannot beat someone’s spending beyond their means.”
On top of that, there’s a good chance your healthcare costs will be higher than expected now, too. Especially if you retire before you qualify Medicare at age 65.
For years, financial advisors have also relied on so-called 4% base As for retirement income: Retirees can withdraw 4% of their total portfolio each year to live in, while maintaining an account balance large enough to last for 30 years.
However, retiring for a longer period amid so much economic uncertainty also puts this benchmark to the test.
“A time horizon of 35 years with interest rates at historic lows could make 4% more difficult,” said Matthew Young, president and CEO of Naples, Florida-based. Richard C. Young and Company., ranked fifth on the CNBC FA 100 list. “Tell clients you might want to consider 3%, just in case.
“We don’t know what kind of environment we’ll be in in the next 15 years in terms of revenue,” Young said.
Even a typical view Asset Allocation change.
Stephen Cech, President Check capital management In Costa Mesa, California, which ranked fourth on the CNBC FA 100 list, recommends sticking with 80% equity allocation – up to S&P 500 Index Fund – for a retired person at the age of 65. years to date, S&P 500 Stock Index It’s up 16%, and about 30% in the past 12 months.
“That’s higher than what you would normally see recommended, but it would have worked well historically, and I think it’s more important with lower interest rates,” Cech said of a portfolio weighted heavily toward stocks and equity funds versus a more traditional, highly weighted retirement portfolio in bonds and cash..
“The expected returns will not be as good as they were due to stock valuations and bond yields,” he added. “Models that are based on past returns cannot be projected forward.”
Check also recommends a “two-bucket” approach, keeping approximately five years of spending money on hand in stable and liquid assets such as money market funds and short-term bonds, and investing the rest in stocks for long-term growth.
He said that even if you spent 4% of your assets in the first year (and increased this 3% each year due to inflation), your money would last 35 years.