In a recent meeting with some long-term clients, we began updating their comprehensive wealth plan. I vividly remember their specific goal. They wanted to reach retirement with an annual income of $100,000. Years ago when their journey to their financial independence began, this number was out of reach. Now, due to their hard work and persistence, this goal is actually becoming a reality. If you’re asking yourself this question, “Can I retire with $100,000 per year in income?”, then let’s take a look at how you get there.
My client is projected to have roughly a million dollars in retirement account assets when they stop working. If we apply the 4% rule to this amount, we can expect $40,000 in retirement income. Social Security will account for roughly another $40,000 per year, which isn’t an unreasonable benefit amount for those in middle-class. So far we’ve got around $80,000 a year expected during retirement. That’s a $20,000 shortfall. Here’s how we intend to make up for it.
We came up with a game plan for the additional income. Here are some ideas we discussed. If you’re in the same situation, some may apply to your specific needs and some may not.
In the meeting, the client also asked questions to try to keep from losing income in their retirement accounts. Stay away from financial products with high cost – these products boost the financial (sales) person’s bottom line and not yours. This is the buyer beware list I give my clients:
In 1994, William Bengen, a financial adviser, conducted an exhaustive study on historical returns. He focused heavily on the downturns of the 1930s and 1970s. Even though the study predated the 2001 and 2008 market “crash”, I believe the conclusion of this study is still applicable today. Benger concluded that no historical case existed in which a 4% annual withdrawal exhausted a retirement portfolio in less than 33 years. Now, this is just a rule of thumb, and your specific retirement plan may dictate a different scenario.
So, it is actually possible to reach your goal if you’re willing to work hard. Consider employing a CERTIFIED FINANCIAL PLANNNER™ to keep you on track. A good planner operating as fiduciary on your behalf can help you get where you’re going.