Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

07/21/2004
Achieving financial security in retirement.
After almost 20 years of marriage, I was divorced from a military spouse and receive only $500 from his retirement. Remarried now for 15 years, I am scrambling to ensure that I won't be a bag lady when I retire! While we've consulted with a financial planner, I continue to worry about healthcare costs, living expenses, etc. How do I figure how much we will need after retirement? And - these days -just when IS retirement?
Frank Wells:
expert info »
The best way to find out how much income/money you need for retirement is to start with your expected living expenses. Ask yourself if you need the same, more, or less during retirement. You should have a budget, or know how much you live on today, and then what will change when you
retire (i.e. mortgage is paid-off, inflation adjustment for cost of living, medical/healthcare expenses, travel, lifestyle, etc.).

There are many calculators that will adjust for inflation, meaning you just have to know how much you need if you were retired today, in today's dollars.

Once you have your budget (how much you need monthly and yearly), you can figure how much money/income you need to meet your expenses. Depending on your age at retirement, you can use 4 or 5% returns as a very conservative expected return on your money. $1,000,000 at 5% will provide $50,000 per year in income, before paying taxes.

(Monthly budget x 12) / .05 = minimum amount of money you need in your retirement account to meet your budget (before taxes).
Charlotte Anne Bond:
expert info »
Retirement is an illusive time period. Depending on your current age Social Security Administration deems your retirement to be between 65 (those retiring in the near future) and as far up as 67 I believe. However, the great thing about retirement it can be whenever you can afford it.

Most planners recommend trying to have enough to live on 60 percent of your current income (in inflated dollars) for 15 to 20 years. However, to get more specific someone would need your current income, your current retirement savings, and your current age. If you can save enough to
live on 5 percent of your total retirement savings each year comfortably you will be in very good shape and it is unlikely you will outlive your savings.
Jennifer Lane:
expert info »
I think it's important that you go back to the financial planner with your concerns…or to a different planner if you don't feel comfortable with the one you're working with. While there are many calculators available on the web that will help you estimate a nest egg target for retirement…only a good fee-only financial planner can spend the time to help you answer the broad questions of medical costs and budgeting.

The FPA and NAPFA are two good resources to find a planner in your area.
Stacy Swanson:
expert info »
There are some very good websites that have ways of calculating how much you will need to retire, depending on your current situation and future plans. They will guide you through social security benefits, expected health care cost, living expenses, etc..

As for the age of retirement, I don't think that there is a set age anymore. You currently see people working well into the 70's. It would depend on your individual situtation. But over the years the average retirement age has increased.

Some websites that are helpful and trustworthy are:

Social Security website
http://www.firstgov.gov/Topics/Seniors.shtml
www.aoa.gov
www.aarp.org
www.money.cnn.com/retirement