Common Retirement Planning Questions

School of Financial Wellness

How much money do I need to retire?

As CERTIFIED FINANCIAL PLANNERS™ we receive financial questions from our clients all the time. These questions range from very trivial questions, all way to the most complex question of all: How much do I need to retire?

If the answer to this question was simple, our lives would be much easier. On the other hand, we’d likely be out of a job! In reality, this complex question creates a major need for CFP®’s and financial advisors. In our role as financial planners, we help individuals and families understand the needs they will have after retirement and assist them in designing a plan that will get them to their goals.

This leads us to address the question at hand: How much money will you need to retire? While it is near impossible to answer this question exactly, there are some very important factors you will consider in determining your answer. Let’s take a look at some of the most critical items you should address when developing your retirement plan.

Consider the location where you are planning to retire.

Just like with most property investments, not many things matter more than location, location, location when calculating how long your retirement account will last. The cost of living where you plan to retire can create huge swings in the amount of money you will need to fund your retirement.

There are articles all over the internet that estimate the amount of income you will need in each state to retire, but in our opinion those articles do not tell the whole story. They do a good job of giving you a ballpark estimate for each state, in some cases, but you would still need more information to make a smart decision.

Consider this, it is common knowledge that the cost of living can vary greatly from city to city, within a state. For example, anyone who has ever visited San Francisco and the Mojave Desert in California shouldn’t have a hard time noticing the difference in the cost and quality of the respective property. One should easily infer that the cost of living in the Mojave would be drastically different than living in downtown San Francisco, even though they are in the same state.

So, when choosing a location in which to retire, consider the following factors:

  • Total cost of housing and property
  • Cost of staples such as food, utilities and medicine
  • Cost of transportation
    • public transportation costs
    • gasoline costs
    • proximity to family, friends and hobbies
    • proximity to an airport
  • State and Local Taxes
  • Education Costs

Clearly these are not all the factors that impact cost of living in a city, but they are some of the most important with regard to the overall expense. Working with a CFP® is a great way to get help with calculating your expected costs during retirement for your exact situation.

How much income will you have in retirement?

Most of us will have some income during retirement. Social Security, pension accounts and other investments are just a few of the ways you can earn money in retirement. In addition, there are many people who continue working after retirement, at least in some capacity, to supplement the income provided by their retirement savings.

No matter where your income originates, it is an integral part of the calculation that determines how much savings you should need to retire. Be sure your CFP® is aware of all your income streams, so your retirement plan can be accurate and effective.

How much will you spend on living expenses in retirement?

This is the hardest question for many people when developing their retirement plan. Determining your monthly expenses during retirement can be difficult, even for the savviest of planners. First off, if you’re not close to retirement, it can be very difficult to estimate how much things will cost that far into the future. Second there are so many variables in life and the economy, how are we to know if we’ll even be burning gasoline by that time – and if so, how much will it cost? And finally, how will our healthcare system function in the distant future? Will the costs of healthcare and prescription medication continue to rise? Will you need long-term care?

In addition to these challenging questions, you will need to determine how much you can reduce your living expenses in retirement. Whether that be through moving to a cheaper place to live or cutting back on luxuries, these decisions need to be addressed before it is too late.

As you can see, it’s not difficult to get lost in this discussion. That is why we believe it’s so important to consult a CFP® when determining how much money you will need to retire. A CFP® has the experience to guide you through these decisions while developing your comprehensive retirement plan.

Other Retirement Planning Considerations – Personal Situation, Estate Planning

When developing your retirement plan, your CFP® should get to know your personal situation in detail, so they can help you make intelligent decisions. Be sure to make them aware of any goals or travel plans that you have for retirement.

Another important consideration is what you plan to leave your family members as inheritances. A CFP® can guide you through the process of developing an estate plan designed to maximize your family’s wealth.

Retirement planning is complex, but we’d enjoy the opportunity to guide you through this challenging process. Contact Meld Financial or schedule a meeting with our team of CFP®’s to get started on our proprietary retirement planning program we call Situational Investing™.

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Why Meld Financial?

Meld Financial, Inc. is an independent wealth management firm located in Birmingham, AL.

We specialize in financial planning, investment management, employee benefits and executive benefits for individuals, families, trusts, foundations and institutions.

We provide independent and objective services melded with customer-driven financial goals.

Mark McGarvey - Founder - Meld Financial

“We will always recommend the same course of action we would choose for ourselves, given the same circumstances.”

-Mark McGarvey, Founder