We all need the answers to some key questions when planning ahead to achieve a secure financial future for our retirement years. Initial important ones are:
When will you have the resources to be able to retire?
How much savings will be needed then to supplement social security and other benefits during your retirement years?
What savings and other property will remain for your heirs?
What should your investment strategy be and what investments should be chosen to meet your risk and return objectives?
How well do your current investments and any planned future savings meet your needs?
What is your best retirement benefit distribution choice from any retirement plans you have?
How do you best manage and estimate the amount needed to cover future taxes before and during retirement?
The answers to such questions can be determined by an analytic assessment that is based on your current financial situation and planning assumptions. Some necessary assumptions that are incorporated into an analysis are:
Mortality ages for your family, the level of future inflation, future tax rate on investment earnings, rate of return achieved for investments, and future annual savings estimate. The analysis should create a year-to-year projection showing your future income need, income expected, and savings utilized. It should also calculate whether your current and any future savings will be adequate to maintain your desired income. It is important to periodically update your analysis (we recommend yearly) to monitor your progress and make any desired adjustments to your assumptions.
Greg Tinaglia
(last updated 04.03.2015)