When you were in your twenty’s retirement was far from your mind then BOOM! you were facing the day that you were going to be no longer working.  Thankfully, for most of us, our kids are out of the house and have started their own careers. Hopefully you’ve been able to ramp up your retirement savings with less mouths to feed.  Now your nest egg has blossomed over the last few years but yet you continue to wonder, “is it enough to last until I die?”  Well, face it, no one really knows the answer to that question but a fee-only Certified Financial Planner can at least discuss some nuances that will allow you to stay focused.

A great web site to check out is the Illinois-based National Association of Personal Financial Advisors (NAPFA) with “strictly fee-only members.

Napfa web page

This web site is full of information.

Retirement and Death are Two Very Different Life Events

Many investors believe retirement is when risk should be taken out of his or her stock portfolio. Common propaganda guides investors to ratchet back portfolio risk and become ultra-conservative upon retirement. The problem is that a retiree could live the span of another career before he or she passes away. Proper investment growth is as important during retirement as it is during the accumulation phase. Inflation still exists after retirement and healthy portfolio returns become even more important as withdrawals are factored in.

The Stock Market Doesn’t Always Return 6%

Most financial advisors will toss around historic returns in round numbers and hypothesize to the hilt. The truth is that some years your portfolio wins and some it loses. The average stock market returns over long periods of time may average to a round 6% but retirees should prepare for losses. The overall stock market has increased over time, yes, but it climbed out of valleys and over the tops of peaks to get there. Retirees have no idea where his or her retirement years may fall in that stock market lifecycle. During retirement year five will there be a stock market recession? Will year ten of retirement see high inflation? No one can predict. Underestimating portfolio return and utilizing worst-case scenarios will help solidify a realistic idea of how much money is truly necessary to last a lifetime.

Will You Spend More or Less During Retirement?

If you are the type of retiree looking to travel or possibly purchase a second home, you will more than likely be spending more in retirement than during the accumulation phase. If your goals are locally focused and involve little travel or added expenses, you will possibly spend less during retirement. The truth of this debate leans toward spending more in the early years of retirement and then spending less as you age. Sadly, toward the end of life people are unable to travel as much and cannot take care of multiple properties. Well-trained financial planning professionals will accommodate for the previous lifestyle fact with his or her calculations.

There are some fancy terms you should mention to your financial planner like, “Monte Carlo simulation” and “long term care analysis,” but for this conversation the ability to clarify certain misconceptions will bring great clarity.

It takes time, effort, and a monetary investment to discover if enough is truly enough, but nothing good ever came easy.

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