Lifestyle

Back in the day, $1 million dollars used to sound like enough to retire on. In fact, over time, this number became a popularized ideal in mainstream culture as the target number to hit.  While targeting $1 million to retire comfortably might sound like enough for some folks who have a healthy social security benefit or pension plan, chances are you’ll need more than $1 million to maintain or enhance your lifestyle. Many factors determine just how far that $1 million could get you in retirement, so let’s break it down.

Where You Live 

The cost of living in each state has a major influence on how long your $1 million will last. For example, your savings would last over 25 years in Mississippi while you barely make it past the 10-year mark in Hawaii. Looking at cost of living and state income taxes are two factors that can affect how far your money will go.

How Long You Live and Your Lifestyle

Although life expectancy in the U.S. is the shortest it’s been in two decades, it’s hard to say exactly how long you will live. If you live well beyond the average 76.4 years, your $1 million likely won’t be enough. Of course, the more extravagant your lifestyle, the more you’ll need to accumulate in your working years. Luckily, you can control your spending, which means with a little smart financial planning, you can help extend your $1 million. But, stretching techniques can only get you so far, which is why we always champion investing early and often. The sooner you begin, the less aggressively you’ll have to save as you near closer to retirement.

Your Health and Long-term Care

Of course, your health also impacts your retirement savings. In 2022, the average 65-year-old couple faced $315,000 in healthcare costs during retirement. Although Medicare should cover these costs, there are still medical expenses you will have to pay out of your own pocket. For example, long-term care expenses, which can cost over $100k annually, are not covered by Medicare.

An unexpected stay can really eat into your retirement savings. The healthier your lifestyle, the less risk there is for health issues, but again, longer life means you might outlive your savings.

Social Security and Pensions

Your $1 million is designed to supplement social security and pension incomes, which of course means you’ll want to have an idea of the benefit amount (approximately) you will receive. Factor that estimate in with any pension plans you may have and that can serve as a foundation for calculating your retirement need.

Your Asset Mix and Investment Risks

How you invest your $1 million is critical for retirement wealth management. Cash, for example, won’t do much to improve your wealth, while having a strategic asset mix will help you avoid the impact of inflation and reduce risks. Depending on real estate is also not the best financial planning strategy, as it lacks the liquidity required to cover expenses. If you take too aggressive an approach when investing, you increase the risk of losses, while playing it too safe won’t earn you enough.

The Rate of Inflation

The past year shows how inflation can impact your budget: If inflation rates are high, your money will disappear quickly as you’ll withdraw more money to cover your living expenses.

With so many ifs, you need a solid retirement strategy to help build your wealth. A financial advisor can determine how much you’ll need to retire comfortably and assist with a wealth management strategy. They’ll consider your social security and pension incomes, expenses, debt, and preferred lifestyle to target the amount you’ll need to overcome cash shortfalls and retire with financial stability.

To help you find the magic number for your retirement savings, set up a free consultation with the experts at Platt Wealth Management. It’s your life. We’re just here to optimize it.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

While retirement sounds like an absolute dream, getting there can often feel a little stressful. Are you saving enough? How much do you really need? Will the market be favorable when you do? And, the big one: When can you actually retire?

Narrowing down the best time, or really the best age, for you to retire comes with a lot of considerations, especially what sort of lifestyle you want to have in retirement. So, we’ve put together this list of the pros and cons of retiring at different ages to help guide you to your ideal retirement window.

Retire Before Age 65

Retiring before age 65 is traditionally “early” and is what most of us would like to do. However, the Center for Retirement Research data shows that most Americans retire before or at age 65 with men retiring at an average age of 65 and women at an average age of 62. But is an “early retirement” right for you?

Pros

The two biggest advantages are that you are likely to have more energy and better health at a younger age. Plus, shifting from a full workday to either a part-time job, monetizing a hobby, or finding volunteer opportunities can help make the retirement transition easier.

Cons

Your retirement funds will also have to last longer if you retire early. Leaving behind your career and what are probably your highest earning years early will mean you could be leaving however many years of potential retirement savings (and potentially an employee match) behind. Plus, while you are eligible for Social Security at age 62, your monthly amount will be less if you don’t wait until you are old enough for your full benefit. And, finally, you will need to have a plan for health insurance since you won’t be able to get Medicare until age 65.

Retire Between Ages 66 and 70

Sixty-five has been viewed at the age of retirement since Social Security was established. However, as of 2022, Social Security views the full retirement age at 66 for those born between 1943 and 1959 and at the age 66 plus a few months depending on your exact birth year if you were born between 1955 and 1959. For anyone born after 1960, the full retirement age is 67.

Pros

Getting a few more years of savings and investing on top of waiting until you are eligible for both Medicare and your full Social Security benefit can make a huge difference in your finances. Private insurance premiums and prescription co-pays are not cheap after all. Plus, you paid into Social Security all of those years. So even if you have a pension and other retirement savings accounts, waiting just a few more years to get your Social Security benefits will ensure you get the full amount you are eligible for.

Cons

Well, you saw the data above. Most Americans aren’t waiting to age 66 to retire and most don’t want to. So waiting those extra years could feel like you’re back in school waiting for that last month of school to get over.

Retire at Age 70 and Older

If you’re in the group of folks who have to wait until 67 to get their full Social Security benefits, waiting just another couple years may not seem too bad. But is there anything to gain or lose?

Pros

Some folks just love their work and feel like they would be lost without it. And that’s OK! So continuing to work longer may be better for you mentally and emotionally if you fall into that category. Plus, if you wait until age 70 or older to start taking your Social Security benefits, your payout will be the highest on top of the extra years of retirement savings and investing. You may never have to worry about having enough money in retirement.

Cons

You will not be able to predict what your energy level or overall health will look like as you get older. Your health could start declining before you retire or after. You could be giving up the opportunities to travel or do other things you enjoy that you always planned to do in retirement if you wait. Even if your nest egg is larger, you could end up not having enough time to use it.

Finding the Right Answer

There is not really a right or wrong answer to when you should retire. Each person and your unique circumstances can change and so can the financial landscape. Many of our clients even benefit from doing a “test run” on their retirement plan before they actually leave work to see if this changes their perception of their need. Either way, we encourage you to lean on an expert to help guide you to a retirement plan that works best for you.

At Platt Wealth Management, we empower our clients to lead their best lives by providing them with the financial expertise they need. We help our families think through their goals, and even dreams they never thought possible. Then, we work together to put in place financial options that give them peace of mind. Schedule a call with our team today to discuss your opportunities.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Sometimes long vacations can seem like a test run for retirement. Long walks on the beach. Endless rounds of golf. All the umbrella drinks you want. But there’s more to retirement than just all the cliches of tropical relaxation.

You are going to have plenty of regular days at home. But what will those look like? And how will you feel about being retired and on a “fixed” income? Are you confident in your current retirement plan to keep you not only financially comfortable but also enjoying life all the way to the end?

Here are three ways to test run your retirement plan for greater success and fulfillment later in life:

1. Start Thinking Like a Spender

No, we don’t mean to start spending frivolously.  We mean to start wrapping your mind around the idea that you will be moving from a saving mindset to a spending one. Because you will have chosen to invest wisely with the help of a trusted financial advisor, you will likely be receiving an income from your assets. But, for many folks, it can be a mental mind twister to no longer have a paycheck coming in (even if you owned your own business).

Some recent research from BlackRock and the Employee Benefit Research Institute showed that even after 17-18 years of retirement, retirees across all levels of wealth had 80% of their pre-retirement savings remaining. And that was even more likely for high-net worth individuals, who have assets worth more than $1 million.

You’re going to have to trust yourself and trust your retirement plan that you have enough to support the retirement lifestyle you want for the rest of your life. And enjoy it!

 2. Start Figuring Out Your Budget

A budget can really help you get into the right “spending versus saving” mindset. Now, a lot of folks think a budget means that you are limiting your spending, but a budget simply means telling your money where to go. And by figuring out a budget now, you will already have a game plan come retirement. No one wants to be the person who runs out of money, but you also don’t want to be the person who has millions just sitting in the background while you watch your life pass your by. It’s your money. You should leverage it to help you meet your goals, but also to make sure you live a fulfilling final chapter.

Once you have your budget all written out or put into a spreadsheet or app  — whatever works best for you (and your spouse) — take it for a test drive. See how it works for you for a month or so. You can make the necessary adjustments now so you’re ready once retirement comes along. You may uncover that you need more or less than you anticipated and can work with your financial advisor to make modifications as needed.

3. Start Planning a Routine

Aside from the money aspects, you also need to consider your time. It makes sense that all you can think of now is how great it’ll be not to have a plan. No meetings, no deadlines, no responsibilities. Woohoo! But, throwing routine completely out the window can be a huge change to you mentally and physically. Just think about the first few weeks of the pandemic when we were all asked to stay inside. It was certainly strange for many of us!

Often, mental health can be a touchy subject for some, but you do need to consider what a change in routine will do to yours. Remember that you will have had a schedule from the time you started school in kindergarten or preschool all the way through your working career. That’s a long time! And mental health can especially be a struggle for newbie retirees. Even before the COVID-19 pandemic caused depression and anxiety to skyrocket in adults of all ages, one in 10 (11%) older adults — those age 65 and older — reported depression or anxiety on the 2018 Medicare Current Beneficiary Survey. Consider printing out a calendar and writing up a model week of how you think you may spend your time, including when you will take care of non-negotiable responsibilities, your physical health, socialization, and household responsibilities to protect your mental health in this new stage of life. 

Still Need Some Help Preparing for Retirement?

Don’t have a retirement plan yet? Not confident in your current plan? Or simply need a retirement plan check-up? No matter where you are in your retirement planning journey, our team can help. Simply schedule an appointment with one of our trusted advisors to discuss your opportunities today.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.