An Easy Way to Calculate Your Retirement Spending

How do you determine when to retire? The basic answer is earning enough money from investments and other sources to support your way of life.

Many retirees and those who are beginning to consider retirement struggle because they lack a solid understanding of their annual spending patterns. It can mean the difference between someone enjoying a fantastic retirement and running out of money if they don't know that figure or plan.

Fortunately, this is typically simple to understand. Most people have one or two checking accounts to pay their expenses, including their credit cards, mortgage, cash withdrawals, and other debts. Banks summarize everything that occurred with your account over the month on your bank statement, including starting and ending balances, deposits, and withdrawals.

All that needs to be done is tally up the sums of the previous 12 months' monthly withdrawals. The amount of money spent each year is that sum. The fact that most people are off by roughly 30%, and occasionally much more, can be a little alarming.

You'll better understand how much money you'll need for retirement if you know how much money is being spent. Keep in mind that your latter years may stretch for 20 to 30 years or longer, which is about equivalent to how long a large family would occupy a single home. Once you are aware of your annual spending, you may carefully design a retirement income strategy.

You'll need money that must be safe and generate consistent income throughout the course of your lifetime. Money that you know you need to live off or shouldn't be kept in a location where it might depreciate.

Since it is predictable, you can forecast how much, when, and how long this money will last. Funds from sources like Social Security, pensions, and rental properties are examples of this money, which should be used to pay for your essential expenses.

Some people will benefit by delaying their Social Security benefits. For instance, a single individual with few assets would prefer to continue working as long as possible and put off taking Social Security payments to boost their monthly income. The Social Security full retirement age (FRA) ranges from 66 to 67 years.

You receive delayed retirement credits from Social Security as compensation for delaying the time you claim your retirement payment. Every month you put off applying for benefits after your FRA until you turn 70 results in credits. Then, for each additional year you wait, those delays increase by 8%.

With pensions, having the joint-and-survivor benefit option is essential for giving a surviving spouse a financial safety net. The surviving spouse is guaranteed a consistent income, sometimes 50% or 75% of the initial benefit if the pension earner chooses the survivor's benefit.

Additionally, retirees need reliable, comparatively risk-free investments and add security. Bonds, fixed annuities, and certificates of deposit are some of these investments. They are far less erratic than stocks, pay dividends and interest, and let one access funds for celebrations, travel, hobbies, and other activities that retirees ordinarily enjoy doing in their first ten years.

A predictable source of retirement income is a fixed annuity. It provides a rate of return that is guaranteed, regardless of whether the insurance company generates a profit on its own investments to cover that rate. The insurance provider is at risk. A fixed annuity with modest payouts has the drawback of maybe not keeping up with inflation.

In exchange for keeping the money on deposit for a set amount of time, top-paying CDs offer interest rates higher than those of most savings and money market accounts. Compared to stocks and bonds, they provide fewer prospects for growth but have a guaranteed rate of return.

And then, we have stocks, mutual funds, exchange-traded funds, real estate investment trusts (REITs), precious metals like gold and silver, and variable annuities. Since the goal of having these funds is to realize financial growth, they should have a time horizon of at least ten years, and they are the most acceptable sources for keeping up with inflation.

With a combination of the financial products that were mentioned, a solid financial strategy, and making the necessary adjustments now and then, retirees will be able to balance security and growth to enjoy a well-deserved retirement.

At Copley Financial Group, Inc., with offices in San Diego, CA. and Uniondale, NY., we're here to help you with any question that you may have. So send us an email, give us a call, and the team and myself will be there to help you.