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5 Crucial Steps To Ease Money And Health Fears In Retirement

May 16
09:59 2018

What keeps you up at night when you think about retirement?

We asked financial planners what their clients who are planning for or living in retirement worry about and what can be done to alleviate those worries.

Catch up if you haven’t saved enough

Rita Cheng, a certified financial planner with Blue Ocean Global Wealth in Gaithersburg, Md., says pre-retirees worry — especially since many don’t have a defined benefit pension plan — whether they have saved enough in their 401(k) to pay for retirement.

If you have such worries, estimate how much income your nest egg will generate in retirement. Do this by estimating how many years your money would last if you withdrew 4% a year for 30 years. If you can’t make your money last that long, increase how much you are saving for retirement and take advantage of the catch-up contribution rules. Employees who are age 50 and older can save an additional $6,000 a year on top of the $18,500 they can salt away in their 401(k) this year.

Rethink spending

Steve Branton, a senior financial planner with Mosaic Financial Partners in San Francisco, says pre-retirees also worry whether they will have enough income to cover all their expenses once they stop working. Will they be able to pay all those bills? Or will their standard of living drop?

If you’re worried about this, Branton recommends a cash flow analysis: Compare all income sources in retirement to all expenses to determine if there is an expected surplus or deficit at various stages of retirement. If there are shortfalls, go back to the drawing board: Reduce expenses, retire later and save more. But if there are surpluses, Branton suggests saving that amount.

Branton also suggests conducting a Monte Carlo analysis to determine the long-term viability of your retirement when investment returns and inflation are varied greatly over extended periods of time, such as 25-30 years. According to the Massachusetts Institute of Technology, Monte Carlo simulations are a statistical technique used to model probabilistic systems and establish the odds for a variety of outcomes.

Continue Reading at USA Today

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