The amount of money required for a comfortable retirement has soared.
Walton Financial Group in Barrie, Ontario has advice about what is needed to plan a comfortable retirement
How much do I need to retire? That is a question everybody asks and the answer has become more complicated. Due to rising inflation, the figure may be higher than you think.
To get a more realistic picture of how much money you’ll need for retirement, your analysis should take a holistic approach. This means considering all aspects of your finances, including items that could affect your cash flow and expenditures.
Below are some questions to ask yourself.
LONGEVITY
It may seem morbid or grisly, but you must first consider how long you expect to live. Unless you are clairvoyant, there is no way to be sure. However, you can make a reasonable estimate based on your general level of health and family history. For example, if your family members typically live into their 80s and you are in good health, then you may want to assume that you’ll still be around at that age.
LONG-TERM ILLNESS?
While you’re pondering life expectancy, also consider whether your family has been prone to costly, long-term illnesses. If so, insuring your retirement assets should be high on the list of items to include in your analysis. You may want to consider long-term care (LTC) insurance to pay for nursing home care or similar services should you eventually need them.
Having to use your retirement savings to pay expenses could wipe out your nest egg in no time. This is especially true if your assets are significant enough that it’s unlikely you will qualify for Medicaid-supported nursing home care—but you’re not so wealthy that your assets will easily cover whatever happens to you. If you’re married, consider what would happen if one partner became sick and drained the savings intended to support the other partner after a spouse’s death.
EXPENSES IN RETIREMENT
Projecting your expenses during retirement can be one of the easier parts of your needs analysis. This is as simple as making a list of the items or experiences you expect to spend money on and determining how much they are likely to cost.
One way is to use your current budget as the starting point. Then eliminate or lower the expenses that will no longer apply (such as the gasoline you use to commute to and from work) and add or increase the items that will represent new expenses during retirement (such as higher home utility bills or more leisure travel).
Data shows that older people have been disproportionately affected by rising inflation over the past years. On average a larger chunk of their income goes to pay for food and energy, which both have become more expensive. The cost of living has soared.
If you are in position where your housing costs are fixed, meaning you have paid off your mortgage, you are fortunate. However, if you live in rental accommodation, or with mortgage terms that extend into retirement years, the challenge will be to build a retirement plan that will cover these costs and still enable you to enjoy a reasonable standard of living.
The solution – arrange a consultation with a retirement planning advisor at Walton Financial Group in Barrie, Ontario.
