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WHERE DO YOU WANT YOUR MONEY TO TAKE YOU TODAY?

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needs-and-wants method comes in. Rather than compare the current level of expenses with what will be estimated for retirement, this approach goes into the future to calculate how much annual income the clients will need in order to keep the standard of living that they want. It also takes inflation into consideration, and will calculate how much the clients need to save between now and when they plan to retire.

Should conditions or expectations change (i.e., retirement date changes, clients receive a large inheritance, inflation is much greater than anticipated), it will be necessary to update the model to reflect an accurate and realistic forecast for the clients. Depending on what the updated analysis says, you may need to adjust your savings and investments to help you reach your goals.

FUNDING YOUR RETIREMENT

Once you’ve figured out how much money you will need to fund your retirement, the question becomes, “Where will that money come from?” To answer this, you will need to estimate what your annual income will be during retirement. Currently, the two main sources of retirement income are social security and employer-spon- sored pension plans. However, unless you will be retiring in the very near future (20 years or fewer), you may not be able to rely on social security as a guaranteed income stream. But what about pensions? These days people are changing jobs more frequently, which causes them to have smaller pensions, or no pensions at all. Plus, companies are phasing out pensions to help cut costs. What I’ve found is that most people cannot count on pensions. And, unless the Social Secu- rity Administration figures out how to continue funding the social security trust funds, people won’t be able to rely on that, either. See Figure 14.1) In fact, many people in their 20s and 30s don’t even believe that Social Security will be around for them when they want to retire. This means that people have to rely on themselves more and more for their retirements.

Let’s assume that social security will be there for Jeff and Mary Client. Since they both work, they will both be entitled to their own retirement benefits, rather than having one receive worker’s retirement benefits and the other receive spousal benefits. Assuming that they

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