This One Thing Will Keep You from Retiring

By bbagnall | Uncategorized

Jun 22

According to AARP, A healthy, upper-middle-class couple who are 65 today have a 43 percent chance that one or both partners will live to see 95.

Many experts recommend that retirees live by the “4% rule,” whereby they withdraw 4% of their savings in their fist year of retirement and then adjust that percentage upward with inflation in following years.

A June 2015 Government Accountability Office analysis found that that average Americans between the ages of 55 and 64 have accrued about $104,000 in retirement savings.

Read more: The Average Retirement Savings by Age for 2016 | Investopedia http://www.investopedia.com/articles/personal-finance/011216/average-retirement-savings-age-2016.asp#ixzz4CJpvYw5g
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A famous financial planner’s rule of thumb is that you can spend 4% of your initial savings per year  (See: “The Retirement Spending Solution“), adjusted for inflation, and it will last for 30 years. If you have $500,000 saved, 4% of that is $20,000 per year. Can you live on $20,000 per year, plus whatever you’re going to get from Social Security and a pension (the $20,000 and—for now–Social Security would be bumped upward for inflation)? If you can’t, then you’d better start saving more or thinking about when and how you plan to retire.

You can calculate the amount you’ll actually need to save if you follow the 4 percent rule. “U.S. News & World Report” says retirees should plan to live off 4 percent of their savings each year. This will allow a retirement portfolio to replenish itself each year. That means if you get an average return of 4 percent each year and take out 4 percent, you will not decrease the value of your portfolio. When you know the amount you want to live on, you can find your savings target. For example, if you plan to live on $50,000 a year, divide that figure by 4 percent and you will see you need $1,250,000 in retirement savings.

 

Currently, the average retired worker is receiving $1,341 per month from Social Security, and if you include spousal benefits, then the average monthly household’s haul from Social Securityclimbs to $2,212

According to Healthview Services, the average healthy couple retiring today will spend $395,000 on Medicare B, D, and supplemental Medicare plan premiums and out-of-pocket cost sharing, such as co-pays.

Given those numbers, it’s no surprise that the Employee Benefit Research Institute reports that only 21% of U.S. workers are very confident that they’ll be financially secure during their golden years. If you’re one of the 79% that isn’t so confident, then there’s no time like the present to begin making changes that could have a big impact on your retirement nest egg.

There’s the amount you save and then there’s how you invest.

The bad news is that people are spending more in retirement on health care, utility bills, and particularly on mortgages. “The real reason why $1 million is not enough, sadly, is because a lot of people still have mortgages coming into retirement these days,” says Eileen Freiburger, a fee-only planner in Manhattan Beach, Calif. “I would never let a person retire if they haven’t learned to live within a certain dollar amount,” she says.

The $15,978 Social Security bonus most retirees completely overlook

 

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