Outliving Your Money

By Max Valavanis, CFP ®

“Do I have enough money to retire?” is an often-asked question I hear. Interestingly, this question is not easy to answer. There are many variables to consider and no advisor has a crystal ball. Retiring too early does have its measure of risk, but retiring too late can also prove to be a harebrained idea – especially if you don’t love your work. So, when is the right time to retire?

Unfortunately, this question is better answered with more questions. Do you love your work? Is your career a job or is it a passion? How is your health? If you have a spouse, are they already retired? Asking yourself these questions is a good first step to making a decision. Often the best scenario is to follow your heart, take baby steps, prepare, and seek professional advice.

You can imagine reaching retirement like a mountaineer summiting a mountain. While reaching the peak is an accomplishment on its own, descending down the mountain is an entirely different feat. While working towards retirement, the goal is to accumulate assets in both retirement and investment accounts. Once you reach the precipice of retirement, the role of these accounts morphs into generating paychecks. If these accounts are designed poorly, the risk of outliving your money can loom over your retirement.

When trying to evaluate your prospects for retirement, you must step back and view the whole picture. Will retiring save you money? Once retired, your income tax bill may be slashed. You may cease contributing to investments, savings, and retirement plans. Many retirees drive less and, therefore, their automotive expenses drop. If you are retiring old enough, qualifying for

Medicare can decrease your healthcare costs. If you subtract all the expenses associated with working, your cost of living may be notably less in retirement.As a general rule of thumb, you need 70% to 80% of your preretirement income in retirement.

This figure is a widely agreed-upon nugget of financial planning, but should be approached cautiously. That being said, this rule is a great starting point in planning for retirement, as long as you maintain prudence and seek to maintain your standard of living. With this number, you can subtract your estimated pension and social security income. Afterward, the number you are left with is your estimated monthly deficit. This income deficit usually will be filled with retirement savings, which is the tricky part that often trips up retirees. They must invest their retirement nest egg in a manner in which their monthly deficit is satisfied AND they do not unnecessarily risk their nest egg from depletion. While this balance is often difficult, the guidance of a Certified

Financial Planner™ can be invaluable. If you are standing at the gates of retirement and just don’t know what to do, call me at (321) 956-7072. For readers of this magazine, I offer a no-obligation, free appointment.

Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory

services offered through J.W. Cole Advisors, Inc. (JWCA). ValaVanis Financial and JWC/JWCA are unaffiliated entities.