Can You Really Afford to Retire

Ken: Daria, a lot of people are asking me up and we ask ourselves. A lot of people are asking on our national radio show and here at douglins.com, can I really afford to retire. Anybody can retire but can I afford to retire and live lifestyle me or the same as at retirement. Now I want to say before you start because I don’t want to forget, we wrote piece on douglins.com and we’ll flashed up where you see it. We wrote a piece called Can You Really Afford to Retire. But we also want to deliver this kind of information if you prefer to get it in video form because it’s important. Daria: It really is and the fact of the matter is that they have readjusted what percentage of your income you need to have in retirement or just prior to retirement in order to retire and maintain the same lifestyle. Ken: It was like 75% to 85% of your income average for the last— Daria: When we first started it went to 70 to 80 then 75 to 85%. Well the latest figures coming out from the financial planning industry is you need a 100 to 125% of your pre-retirement earnings in order to maintain your lifestyle to the degree that you want to maintain it in your retirement years. Because these figures are coming around with the increase in inflation that we've seen and so many things including food, gas, healthcare, etc. Ken: I want to talk about inflation but before I say that I want to put a disclaimer Daria. We can't tell you specifically douglins.com family member— Daria: You can retire now. Ken: No we can't. All we can do is give you the kinds of things you need because you got a zillion dollars ready for retirement have a nice one with around the world trip. But if you're like most of us where are you going to watch things. All we’re going to do now in the next three to four minutes is give you some things to look at. Number one let’s talk about inflation. We project that people who are smart if not smarter certainly project around 4% is a good rule of thumb. All right in three tax bracket—I know you get these numbers at your fingertips Doria. In three tax bracket that’s 25, 28 and 33%, here’s the taxable equivalent to keep pace of the 4% inflation. All right give me the three. Daria: Have you calculated taxes into these numbers? Is that before tax? Ken: Yes but no state. No we’re talking federal tax but no state tax which means that you need to do more. I'm trying to get reasonable. This is federal tax 4% inflation. Daria: 4% inflation if you're into a 25% tax bracket you would have to have a taxable return of 5.3%. Not easy to find with these low interest rates at the current moment that could change shortly. 28% 5.6% would have to be your taxable yield to beat the federal tax man in inflation. Ken: And how about the 33%? Daria: And at 33% tax bracket, you need to get 6% and that’s not easy to do without taking on some risk. Ken: 6% is not unreasonable assumption because— Daria: In good year. Ken: In good years, we’re hoping we’ll see some of those but in terms of the idea where you say “well I got X numbers of dollars and I'm going to take”—Dolan says 6%. No. Don’t figure you're going to take 6% of your money out every year to live on. Figure around 4% right around the inflation level. “Yeah but I could do better than 6%”. To god’s ears tremendous, great idea plan on 4% withdrawals. Daria: And you have to be careful if you sit down with a broker or financial planner about taking money from mutual funds on a regular monthly basis. Your retirement is going to live or die by what that percentage withdrawal on a monthly basis year after year after year. Don’t go with wildly optimistic ideas because you're going to end up living to regret it in a very meager several last years of your life. Ken: Yes stay tune at douglins.com because we talk about investment. We’re not talking a lot about investing here; we’re talking about some considerations. We talk about investing all the time so there are other videos and lots of contents. How do I invest to get that? There's plenty in there. Daria: Because you also have to understand that in retirement you use to be well when you retire your tax obligation is going to go down because you won't be earning as much. Not necessarily so unless the government outspends itself and spends us into the ditch that it’s digging. Actually it’s more than a ditch now; I think we’re more into like Grand Canyon territory. You cannot assume that your tax rates are going to go down in retirement; they may even go up in retirement as the government comes to need more and more money from us. Ken: Not only that when you take money out of qualified plans don’t forget that many of those plans should not pay taxes so there's going to be taxable. Another one you want to look at is health insurance don’t forget to be prepared to pay insurance until you're age 65 when Medicare kicks in. Daria: And then expect to escalating premiums on your Medigap policy forevermore after that. Ken: Be sure to go ssa.gov that’s social security administration.gov to look at when is the best time to take your social security benefits. We wrote something about taking benefits at 62. For many people that doesn’t make sense if you wait until 70 years old, if you wait and can wait and that article will explain to you when it make sense to wait or not wait. You'll be talking much, much larger social security benefits. Daria: And there's nothing wrong with the idea of taking your formal retirement at age 66 for most people. Ken: They call it NRA, normal retirement age. Daria: Yeah as oppose to national rightful association, bad choice of terms. Ken: But be realistic. Daria: Absolutely be realistic. Consider starting that career you always wanted to have in retirement albeit a smaller basis so that you don’t have to tap in to all that retirement money and by all means if you're kind of just pushing it to get into retirement, pray that you don’t live to 90 plus years of age because you won't have enough money left. And by all means visit our calculators on douglins.com. Ken: Lot of calculators there to help you make those final decisions. We do a lot of investment stuff. We’ll talk about that as we go. Can you really afford to retire? There are some things to think about.