How much income will your assets generate in retirement? Do you know? If you answered no, you’re not alone. A recent study from the LIMRA Secure Retirement Institute (LIMRA SRI) found that more than half of all workers don’t know how their retirement assets will translate into income.1
Creating a retirement projection can boost your confidence in your strategy and help you identify areas for improvement. According to the LIMRA study, almost 70 percent of the surveyed participants said they were more confident in their ability to retire after estimating their income. Of those who hadn’t estimated their income, only 30 percent were confident.1
You can use a retirement income estimate to gain insight into your planning. You may see that you need to increase your contributions or perhaps make a change to your allocation. Below are a few tips on how to use a retirement income estimate in your planning:
Review all your retirement accounts and income sources.
Job change is a common occurrence today. Many people change employers or even industries several times in their career. Each time they do, they may leave a 401(k) account behind at their old employer. It’s possible that you have old 401(k) plans and IRAs spread across multiple employers and financial institutions.
The first step is to gather information from all your accounts into one view so you can analyze your asset balances. Gather statements from your investment accounts. Contact old employers to get information on old 401(k) balances, deferred compensation and other retirement accounts.
You’ll also want to estimate possible income sources. Social Security’s website can provide an estimate of your future benefit. If you’re fortunate enough to have a pension, contact your human resources department or plan administrator for a benefit estimate.
Once you’ve gathered that information, consolidate it in one report. You may need to work with a financial professional to convert your balance information into an income estimate. However, adding up your total assets and income is a good first step.
Project your income.
Once you’ve gathered your balance information, the next step is to project your retirement income. With your Social Security income and pension benefit, you may know exactly what the amount will be. It can be more difficult to project income from an investment account because the distributions aren’t guaranteed* or predictable.
A financial professional can run withdrawal simulations for you that can project your retirement income using different variables. For example, your financial professional may be able to use software to model different rates of return and withdrawal amounts to show you what is sustainable in retirement. That could give you more confidence or help you identify areas for adjustment.
Create a retirement budget.
A budget is always a helpful financial tool, but it’s especially powerful when planning for retirement. You can project your retirement expenses based on your current spending and inflation. You can then compare your estimated spending with your projected retirement income.
If your income exceeds your expenses, you may be on the right track. If there’s a gap, you may need to do more work and consider saving more money to reach your retirement goal.
Again, this is a process in which you may benefit from speaking with a financial professional. They have experience building retirement budgets and can advise you on costs and issues that you may not have anticipated.
Ready to estimate your income and boost your retirement confidence? Let’s talk about it. Contact us today at Retirement Peace Project. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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