There is no one way to build your retirement savings- everyone is different, has different bills and other expenses that they will have to pay each month, and therefore, the way you build your savings will be different.
Let's Look at Two Scenarios to Explain…
Person # 1
This person has Social Security and a pension that equals $3,000 a month, and their expenses are very low, so it only cost them $1,500 for living expenses a month. They are in good shape. They have more coming in than what they've got going out. And hopefully, they also have a retirement savings that they can use for fun or emergencies that will last for ten years. That person, while they may need a financial plan, retirement income planning is probably less important to them.
Person # 2
This person makes $2,000 a month through Social Security, but their monthly expenses cost them $4,000 a month. They need to come up with $2,000 a month in retirement just to balance the scales.
One way they might make up the difference is to take the $2,000 out of their savings each month. But at this point, they are running the risk of running out of their savings earlier than expected.
One way to prevent that risk is at the beginning of retirement. Go to your savings and take a piece of that and trade it for additional income. You can do that, for example, with an insurance company. You can give them the money to hold, and they will send you a check every month for the rest of your expenses, in this case, the $2,000.
This allows you to know that you will be able to afford your monthly living expenses and still have your savings for all of the important, fun stuff you want to do after retiring.
Learn More About Retirement Planning
If you are ready to start planning for your retirement, and it's never too early, contact us today to learn more!