ST. CROIX INSIGHTS
BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC
This is a common theme among those approaching retirement age. This feeling can persist even if you have saved diligently. However, it’s important to recognize that this uneasiness is not uncommon, and it often stems from expectations. Start with these steps to gauge your current financial situation.
Use the 4% Rule
For a quick back-of-the-napkin calculation to help you know where you stand, I like to use the 4% rule.
Just add up all of your investment and retirement account values and multiply that number by .04 to determine your (hypothetical) annual withdrawal, then divide that number by 12 to get your monthly “income.”
For example, if you saved $500,000 for retirement, the 4% rule would give you a monthly income of roughly $2,000, which you can expect to last approximately 25-30 thirty years.
It’s important to note that this is a simplified example. Factors such as inflation, market performance, healthcare and personal living expenses can all impact how long your savings actually last.
Is 4% the right planning number for everyone? Nope! But it’s a great place to start when you’re considering your spending habits and financial future. For a customized retirement strategy that takes into account your specific financial situation and goals, reach out to us.
Assessing Your Spending Habits
Now, it’s easy for someone like me to tell you to cut your expenses, but depending on the decisions you’ve made throughout your life, your financial commitments can’t always be quickly or easily changed. Even so, taking stock of your current spending habits is an important first step toward changing them.
Knowledge is power, and I believe that our checkbooks reveal our true financial priorities. Think about it: our account ledger can show us where we spend our money each day, each week, each month, and each year. Read my blog post on Financial Leakage and Budgeting for tips and ideas.
The world has changed so much when it comes to the meaning of retirement. Rather than retire outright, some older workers are shifting from full to part time or even taking up new, less stressful jobs.
Many people are rethinking their work lives, especially as they approach retirement. Depending on your personal goals and financial situation, some out-of-the-box thinking may be necessary. Don’t get me wrong, there is nothing wrong with working in your golden years—but I’d rather have that be your choice!
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Ask yourself- can my portfolio support my lifestyle in my retirement?