facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
Retirement Strategy: How Much Should I Save? Thumbnail

Retirement Strategy: How Much Should I Save?

"Will I outlive my retirement money?" This is one of the top fears for people who are starting to prepare for their retirement years.

Determining how much money you need in retirement is a process. It shouldn't be a number that you pull out of thin air.

The process should include looking at your current financial situation and developing an approach based on your goals, time horizon, and risk tolerance. The process should take into consideration all your potential sources of retirement income, and also may project what your income would look like each year in retirement.

We all have our "blue sky" visions of the way retirement should be, yet our futures may unfold in ways we do not predict. So, as you think about your "second act," you may want to consider some life and financial factors that can suddenly arise.

You may see retirement as an extension of the present rather than the future.

This is only natural, as we all live in the present, but the future will arrive. The costs you have to shoulder later in retirement may exceed those at the start of retirement. As you may be retired for 20 or 30 years, it is wise to take a long-term view of things.

You may have a health insurance gap.

If you retire before age 65, what do you do about health coverage? You may shoulder 100% of the cost.

Suppose you become disabled or seriously ill, and working is out of the question. How will you make ends meet?

Age may catch up to you sooner rather than later.

You may stay fit, active, and mentally sharp for decades to come, but if you become mentally or physically infirm, you need to find people you can trust to manage your finances.

You could be alone one day.

As anyone who has ever lived alone realizes, a single person does not simply live on 50% of a couple's income. Keeping up a house or even a condo can be tough when you are elderly. Driving can also be a concern. If your spouse or partner is absent, will someone be available to help you in the future?

These are some of the blind spots that can surprise us in retirement.

They may quickly affect our money and quality of life. If you age with an awareness of them, you will be able to manage the outcome better.

Your workplace retirement account can play a critical role in your overall retirement strategy. However, some people have gone further with such accounts than others, especially recently.

Much has been written about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Aside from these blunders, some classic financial missteps plague retirees.

Calling them "mistakes" may be a bit harsh, as not all of them represent errors in judgment. However, whether they result from ignorance or fate, we need to be aware of them as we prepare for and enter retirement.

Timing Social Security.

As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for higher retirement income. Filing for your monthly benefits before you reach Social Security's Full Retirement Age (FRA) can mean comparatively smaller monthly payments.

Managing medical bills.

Medicare will not pay for everything. Unless there's a change in how the program works, you may have a number of out-of-pocket costs, including dental and vision care.

Underestimating longevity.

Actuaries at the Social Security Administration project that around a third of today's 65-year-olds will live to age 90, with about one in seven living 95 years or longer. The prospect of a 20- or 30-year retirement is not unreasonable, yet there is still a lingering cultural assumption that our retirements might duplicate the relatively brief ones of our parents.

Withdrawing strategies.

You may have heard of the "4% rule," a guideline stating that you should take out only about 4% of your retirement savings annually. Some retirees try to abide by it, but others withdraw 7% or 8% per year. Why is this? In the first phase of retirement, people tend to live it up. More free time naturally promotes new ventures and adventures and an inclination to live a bit more lavishly.

Talking About Taxes.

It can be a good idea to have both taxable and tax-advantaged accounts in retirement. Assuming your retirement will be long, you may want to assign this or that investment to its "preferred domain," which means the taxable or tax-advantaged account that is most appropriate for it as you pursue a better after-tax return for your entire portfolio.

Retiring with debts.

Some find it harder to preserve (or accumulate) wealth when you are handing portions of it to creditors.

Putting college costs before retirement costs.

There is no "financial aid" program for retirement. There are no "retirement loans." Your children have their whole financial lives ahead of them.

Retiring with no investment strategy.

Expect that retirement will have a few surprises; the absence of a strategy can leave you without guidance when those surprises happen.

These are some of the classic retirement mistakes. To help you avoid them, take some time to review and refine your retirement strategy.  To discuss in more detail, feel free to reach out to us.


Best,


CRA Investment Committee 


Matt Reynolds CPA, CFP®

Tom Reynolds, CPA 

Robert T. Martin, CFA, CFP®

Gordon Shearer Jr., CFP® 

Jeff Hilliard, CFP®, CRPC®

Joe McCaffrey, CFP® 



Important Disclosure Information 

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CRA Financial, LLC [“CRA]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CRA. Please remember to contact CRA, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. CRA is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of CRA’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.crafinancial.com. Please Note: IF you are a CRA client, Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian. 

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your CRA account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your CRA accounts; and, (3) a description of each comparative benchmark/index is available upon request. 

Please Note: Limitations: Neither rankings and/or recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if CRA is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers (to the extent applicable). Unless expressly indicated to the contrary, CRA did not pay a fee to be included on any such ranking. No ranking or recognition should be construed as a current or past endorsement of CRA by any of its clients. ANY QUESTIONS: CRA’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including the criteria used for any reflected ranking.