October 5, 2022

Planning to Retire: Retirement FAQ’s

Retirement. It's a time of life that many of us look forward to. A time to relax, enjoy our hobbies, and spend time with family and friends. But retirement planning can be daunting, especially if you don't know where to start.

You're not alone. In fact, according to a recent study by the Employee Benefit Research Institute, only 57% of workers have even tried to calculate how much money they'll need to retire comfortably!

But don't worry, we're here to help. In this blog post, we'll answer some of the most frequently asked questions about retirement planning. So whether you're just starting to think about retirement or you're already in the thick of it, read on for some helpful information.

FAQ #1: How Much Money Will I Need to Retire Comfortably?

This is a common question and there's no one-size-fits-all answer. It depends on things like your lifestyle, health, and desired level of comfort. That said, there are some general guidelines you can follow. A good rule of thumb is to plan on having enough money to cover your essential expenses plus 80%. So if your monthly expenses totaled $3,000 per month, you would need $3,000 x 12 months x 1.8 = $64,800 per year in retirement income.

Other factors to consider include inflation (which averages about 3% per year) and your life expectancy.

FAQ #2: What Are the Different Types of Retirement Plans?

There are several different types of retirement plans available, and the best one for you will depend on your unique circumstances. Here's a quick overview of some of the most popular options:

  • Traditional IRA: With a traditional IRA, you make contributions with pretax dollars and pay taxes when you withdraw the money in retirement. If you qualify, you may also be able to deduct your contributions from your taxes each year.
  • Roth IRA: With a Roth IRA, you make contributions with after-tax dollars and all future withdrawals are tax-free.
  • 401(k): A 401(k) is a employer-sponsored retirement plan that allows employees to save and invest for retirement with pretax dollars. Employers may also match a portion of employee contributions up to a certain percentage.

FAQ #3: When Should I Start Planning for Retirement?

The sooner the better! The earlier you start saving for retirement, the more time your money has to grow through compound interest . For example, let's say you start saving $200 per month at age 25. By age 65, you will have saved a total ($200 x 12 months x 40 years) = $96,000 . However, if you wait until age 35 to start saving that same $200 per month , you will have saved only ($200 x 12 months x 30 years) = $72,000 by age 65 . As you can see, starting early can have a big impact on how much money you have in retirement.

FAQ #4: How Do I Transition into Retirement

As fiduciary advisors who specializes in retirement planning, we've had the privilege of sitting down with baby boomers on a weekly basis who are considering the possibility of retirement. Like all life transitions, the transition into retirement for most people isn’t easy.  When you think about it, it’s not surprising that it really is challenging for just about everyone to suddenly stop working and be “retired”.  Most people spend 30-40 years of their lives working and during that process saving diligently in hope that one day they will retire. Behaviorally, making the shift from “saver” to “spender” is one of the hardest things to do.  Some of the most common concerns we hear include, do I have enough money to make it last for the next 30-40 years?

The simple fact is that if you have saved diligently throughout your career and have done a good job of managing your expenses, you more than likely will have plenty of money to support yourself in retirement.

However, even if you are financially secure, the transition into retirement can still be challenging. For many people, their work identity is closely linked to their self-esteem and sense of purpose. Once they retire, they often feel lost and are unsure of what to do with themselves. It is important to keep in mind that retirement is a time of transition and not a time to sit around and do nothing. There are endless opportunities available to stay active and engaged in retirement. The key is to find something that you are passionate about and makes you feel good. Whether it’s volunteering, pursuing a hobby or taking up a new sport, there are endless possibilities for staying active and engaged in retirement.

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FAQ #5: How Should I Invest When I'm Retired

When it comes to investing in retirement, there are a few things to keep in mind. First, you'll want to make sure that your portfolio is well diversified. This means potentially investing in a variety of assets. Second, you'll want to have a mix of growth and income investments. This will help ensure that you have enough money to cover your costs, while also allowing your portfolio to grow over time. Finally, it's important to remember that retirement investing is a long-term proposition. This means that you'll need to be patient and refrain from making any rash decisions. Of course, no investment is without risk, so it's important to do your homework before making any decision. But with a little research and careful planning, you can make retirement investing work for you.

In a recent blog, we uncover the best investments for all ages, check it out! You might find it helpful.

Whether you're just getting started with your retirement planning or you're well into it, we hope this blog post has answered some of your questions . Remember, there's no one-size-fits-all answer when it comes to retirement planning. But if you start early, save as much as possible, and diversify your investments, you'll be on your way to a comfortable retirement in no time. One of the easiest ways to get your retirement questions answered is heading right to the source, so call an advisor today!

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This page is a publication of Fiat Wealth Management, LLC. The firm is registered as an investment adviser and only conducts business in states where it is properly registered/notice filed or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.

The information presented is believed to be current. It should not be viewed as personalized investment advice. All expressions of opinion reflect the judgment of the authors on the date of publication and may change in response to market conditions. You should consult with a professional advisor before implementing any strategies discussed. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation.

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