A lot of people seem to drift into retirement, and the COVID pandemic certainly hasn’t helped. If you want to retire with confidence, make sure you know these three things:
- Know your numbers. You need to have a good handle on your retirement income. Start with the numbers you know best like Social Security and your company pension if you have one. Get an up-to-date estimate of your Social Security by visiting ssa.gov and click my Social Security tab. You’ll need to set up an account, if you haven’t already done so, and they’ll have all your most current information. They also have a Retirement Estimator that will allow you to run any number of ‘what-if’ scenarios. Next, estimate the amount of income you can reliably pull from personal and IRA-type investments. Depending on how you’re invested, this might be between 3-5% annually.
- Have a substantial emergency reserve fund. How much emergency reserves do you need? You tell me. I’ve found that the right answer is very personal and dependent upon a family’s particular facts. Depending on the reliability of your retirement income stream, it could be as little as three months of living expenses and up to twelve months or more of living expenses.
- Master your money. You will need to become a master at managing your income and expenses. Building a working budget takes time and experience, so start now. You can be sure of financial surprises along the way…unexpected or unreimbursed healthcare expenses, financial intervention for elderly parents or children, etc. You need to know your numbers well enough to know what you can do and what you can’t do.
Running your retirement is in many ways, like running a small business. You have income; you have expenses, and you must manage the two well if you expect your business to last a lifetime (or two).
Follow The Welch Group every Tuesday morning on WBRC Fox 6 for the Money Tuesday segment.
FOX 6 TALKING POINTS
Are You Prepared for Retirement? Not Until You Do These 3 Things
- Know your numbers: Income & expenses
- Have a substantial emergency reserve account
- Master your money
Stewart H. Welch, III, CFP, AEP, is the founder of THE WELCH GROUP, LLC, which specializes in providing fee-only investment management and financial advice to families throughout the United States. He is the author or co-author of six books, including J.K. Lasser’s New Rules for Estate, Retirement and Tax Planning- 6th Edition (John Wiley & Sons, Inc.); THINK Like a Self-Made Millionaire; and 100 Tips for Creating a Champagne Retirement on a Shoestring Budget. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Welch Group, LLC (“Welch”), or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. More information about The Welch Group and important Disclosures can be found on our website. Consult your financial advisor before acting on comments in this article.