Friday, January 25, 2013

Four Simple Steps to the Complete Retirement - Robert Powell - MarketWatch

Robert Powell lays out his four "simple" steps to the complete retirement as follows:
  1. Getting the right mix of assets, products and withdrawal strategy
  2. Getting retirement expenses right
  3. Maximize your income
  4. Reaching an agreement (between couples on goals, expectations, etc.)
We have been preparing for our retirement years with a lot of excitement and yet some trepidation after years of planning and saving. I look back over the years and the four steps listed above and I think okay. Numbers 1, 3, and 4 are relatively straight-forward if you do the proper analysis and inventory of your hopes, your expectations, your wants, and your needs.

But number 2 is the tough one. As Powell writes "Getting a handle on what your expenses will be in retirement is a big part of getting your retirement-income plan right. But...that is sometimes harder than it sounds."

It is harder than it sounds. Even though I believe that we are starting to get a pretty good handle on our expenses now, it is still hard to figure out what percentage our retirement expenses will be of our current expenses.

Step number 4 on goals and expectations plays a big part in determining what that percentage should be and will be. Most articles that I have read state that you should plan on expenses in retirement being anywhere from 60% to 80% of your expenses while working. That's a large range. And with concerns over medical costs and other costs that impact the elderly greatly, I have seen some who now say it should be 90% or even more.

As we focus now on finalizing our retirement plan, I guess all we can really do is sharpen our pencil (or spreadsheets) and continue to save as much as possible and begin to separate our wants from our needs (Number 4) and plan accordingly.

Read his article here to see if you can offer a better prescription.

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