December 15, 2023

Decoding the Retirement Equation: How Much Do You Need to Retire?

At Fiat Wealth Management, one of the most common questions we encounter is, "How much do I need to retire?" While there is no one-size-fits-all answer, understanding the factors influencing retirement savings can empower you to make informed decisions about your future. Armed with this knowledge, you can construct a retirement plan that aligns with your greatest aspirations. Whether that’s climbing Mount Everest or just spending more time with the grandkids…it all factors into the equation.

Understanding Your Current Financial Landscape

The first step in decoding the retirement equation involves a thorough analysis of your current financial landscape. By scrutinizing your existing expenses, you establish a baseline for your retirement budget. Consider factors such as inflation, which can significantly impact your spending power in the future. Rather than a mere exercise in number crunching, this process involves a holistic review of your financial history. Collecting bank statements, credit card records, and receipts allows for a detailed examination of your spending patterns, shedding light on both fixed and variable expenses.

Categorizing your expenditures into housing, utilities, transportation, and more provides a nuanced view of your financial life. Utilizing budgeting tools or apps streamlines this process, offering efficiency and accuracy.

Beyond the numbers, evaluating your lifestyle choices and differentiating between necessities and luxuries plays a vital role. This introspective approach helps align your spending with your priorities and values, ensuring that your financial goals are not only met but also in harmony with your personal aspirations.

Assessing Your Sources of Income

While understanding your expenses is crucial, a comprehensive retirement plan also requires a deep dive into your sources of income. This goes beyond a simple budget; it's about recognizing the dynamic nature of your financial inflows.

From gathering financial statements to creating a detailed budget that allocates funds based on past spending patterns and financial goals, this step ensures a holistic perspective. Tracking variable expenses and reviewing recurring payments adds a layer of granularity to this process, allowing for a more nuanced understanding of your financial situation.

Moreover, assessing your debt, establishing an emergency fund, and comparing your total income to expenses contribute to a holistic evaluation. This step is not a static exercise; it requires adaptability. As circumstances change, adjustments to your budget become a necessity, turning it into a dynamic tool that evolves with your financial journey.

Navigating the Health Care Maze

Health care expenses become increasingly significant as individuals age, making an assessment of current and future needs imperative. Beyond a mere financial consideration, this step involves a holistic evaluation of your well-being.

Reviewing your medical history, understanding lifestyle factors, and staying on top of preventive care are critical components. Assessing your current health insurance coverage, considering mental health needs, and analyzing prescription medications contribute to a comprehensive understanding of your health-related financial requirements.

Taking a broader perspective, family health history and exploration of wellness programs add layers to this evaluation. The goal is not just financial preparedness but an overall strategy to support your well-being in retirement.

Risk Tolerance, Investment Strategy, and Longevity

Moving beyond the immediate financial considerations, retirement planning also involves an assessment of risk tolerance and investment strategy. A well-balanced and diversified investment portfolio is key, but it must align with your individual risk tolerance to mitigate stress during market fluctuations.

Considering increased life expectancy due to advances in healthcare, planning for a longer retirement is essential. Additionally, factoring in inflation, which erodes the purchasing power of money over time, safeguards retirement savings against the rising cost of living.

Ultimately, determining how much is needed for retirement is a complex and multifaceted process. It goes beyond numbers and spreadsheets; it's about defining the kind of life you want to lead in retirement. Seeking the guidance of a financial advisor becomes invaluable, providing personalized insights and strategies that adapt to changes in your life, the economy, and financial markets. Contact your advisor or schedule an intro call to embark on this essential journey toward securing your family's future.

Remember, retirement planning is not a one-time event but an ongoing process that evolves with your goals and aspirations.

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Every Day is Saturday

Our job begins where most advisors stop—saving money is great, but how do you spend it without risk in retirement? Welcome to Every Day is Saturday with Brad Gotto and Matt Stahl, partners and private wealth managers at Fiat Wealth Management.

In this podcast we help guide you to think about your money in a practical sense and make the boring and complex financial decisions, fun, informative and educational. Join us on this journey where Brad and Matt will explore different strategies on how to spend your money without guilt and have peace of mind knowing you are spending it the optimal way in retirement.

You’ve saved money for a lifetime. Now it’s time to spend it.

In Spending Money and Having Fun, Retirement Income Certified Professional Brad Gotto teaches you how to be smart about spending so you can stop worrying and live the life you want. Old habits are hard to break, but Brad helps you embrace the counterintuitive and build new habits to support your next chapter. You’ll learn how to:

  • Change your mindset around spending

  • Create boundaries that buy you freedom

  • Gain peace of mind with concepts that take the guesswork out of your financial requirements