Will my savings last?

Probably the most common question I’m asked in my financial planning practice is whether or not a person will “have enough savings” to last through out their retirement. 

Calculating retirement needs can be tricky.  That’s because there are plenty of “what ifs” involved. What if… inflation is higher in retirement than expected?  What if… medical expenses spiral out of control?  What if…. taxes go up or the economy goes down?   More troubling is that most of these personal and economic concerns are things that we have very little control over. Still we need to plan and there are steps we can take. 

The first step in retirement planning is to determine what resources you’ll have available to help fund your retirement.  Social Security and Pension income are the two primary sources for most of us.  If you’re heading into retirement be sure to get in touch with the Social Security Administration and request a statement that estimates the benefits you are entitled to receive.  You should also contact the human resources department of your current and past employers.  If you’re expecting a pension, ask for a benefits statement from them as well.  SSI and Pension may not be enough.  To fill the gap you many need to rely on dividends and interest that you can earn on personal savings, retirement accounts, and investments.

The next step in retirement planning is to calculate your expenses. This means coming up with an annual expense budget - something many of us who haven’t tried to survive on a fixed income yet are accustomed to.  I find that many people heading into retirement innocently think that because their mortgage might be paid off or their kids are on their own that the only expenses they’ll be dealing with are taxes and utilities.  Talk to anyone currently retired and they’ll be sure to tell you a different story.  Ever price a hearing aid?  So make a list of expenses and be sure to be realistic about what your expenses are or are likely to be in retirement.

Once completing both of these steps you’ll have a really good idea what your income need is.  Where a lot of people fail is lacking to plan for what they’ll need in the future.  Remember to factor into the picture inflation.  Even a 3 percent inflation rate can be devastating to a retiree if not planned for ahead of time.

It boils down to carefully comparing your income and expenses.  If you do your homework now, and you’re conservative with your estimates, assumptions and projections, it’s only then that you can feel that you “have enough savings”.

Jon Flynn is a Certified Financial Planner ^TM and owner of Flynn Financial in Eynon. He is a Representative of Securities America, Inc., Member FINRA/SIPC and of Securities America Advisors, Inc. Flynn Financial and Securities America are unaffiliated.   Mr. Flynn can be reached at 570-876-5015.