How Much Money Do I Need to Retire, Am I Doing It Right?

Retirement is a stage of life that many look forward to, but it also generates uncertainty and worry.

Determining the amount of money needed for a comfortable and secure retirement is not a simple task.

There are multiple factors to consider, from your projected expenses to life expectancy and the performance of your investments and your retirement plans.

However, for many, this horizon can generate doubts and uncertainty.

If you are in the years close to retirement, these are some of the questions you should start asking yourself:

• Will I have saved enough?
• Will I be able to maintain my current lifestyle?
• How can I do better?
• I’m on the right path according to my interests
• What is the withdrawal strategy I should apply to my 401(k), IRA and Roth retirement accounts?
• Are you contributing enough to the 401(k) plan?
• How will required minimum distributions affect my finances?

By reflecting on these questions and seeking informed answers, you will be on the right path to ensuring a comfortable and safe retirement.

Remember, it’s never too early or too late to start planning for your future; Now, answering each of them can be overwhelming.

That is why validation from a financial advisor is always necessary so that you can answer each of these questions.

First, it is essential to recognize that each person has a unique financial situation. Many people search for information on the internet, consult with friends who have done well, to try to get some answers.

The important thing is to take into account that each case is very particular, that what works for one may not necessarily work for you. Your conditions are unique and that is why hiring a financial advisor to guide you through the process is essential.

It’s like when you go to the doctor with an exam, he can medicate you only because he knows what your values are. He cannot medicate you or recommend treatment with someone else’s information.

There are many formulas that can give you an idea of the estimated amount you need for retirement. What you should take into account is that your financial conditions are unique and will only apply to you.

It is crucial to work hand in hand with a financial advisor who can analyze your case and provide you with personalized advice. Under a fiduciary criterion where your interests must always prevail.

The questions you are asking yourself at this stage are very relevant and must be addressed comprehensively.

Just as the answers should be linked, I’ll explain better if you have multiple retirement accounts.

For example, you cannot create a strategy based on just one, all factors must be involved so that the established plan can work and the steps to retirement are synchronized with each other. So that the result can be optimal and you can take advantage of the maximum potential of your assets.

We will walk through some of the questions raised to try to give you a reference on how to address them.

Will I have saved enough? It is important that you conduct a thorough analysis of your current finances, including your income, expenses, savings, and retirement spending projections. This will allow you to determine if you are on the right track to maintain your current lifestyle or if you need to adjust your savings and planning strategies.

Regarding the withdrawal strategy for your 401(k), IRA and Roth accounts. A certified Financial Planner will be able to better advise you on how to distribute and take advantage of these resources. Considering aspects such as taxes, required minimum distributions and preserving your wealth over the long term.

Evaluate whether you are contributing enough to your 401(k) plan and whether required minimum distributions will not significantly impact your finances. These are key variables that must be analyzed and considered.

Finally, remember that there are various formulas and tools that can give you an estimate of the amount needed for your retirement. But these must be adapted to your particular situation.

According to a study by the (Employee Benefit Research Institute, 2023) it indicates that 77% of American adults are taking steps to prepare for retirement. This is positive, let’s see why it is important to go beyond statistics.

Beyond action, right action:

While many are taking action, not all actions are appropriate to achieve desired retirement goals. Since retirement is a crucial life project that requires strategic planning and periodic adjustments.

Don’t settle! Seek the advice of a Certified Financial Planner to build a solid financial future and enjoy a full and peaceful retirement.

On the other hand, it is important to consider what age is best for me financially to retire. Over the past few decades, a Fidelity study has seen a gradual increase in the average retirement age in the United States.

Currently, it stands at 61 years, although this range can vary between 61 and 67 years, depending on the state and personal circumstances. It is important to consider factors such as full retirement age and individual preferences when planning the right time to retire.

According to a recent Employee Benefit Research Institute (EBRI) survey, it analyzes Americans’ attitudes and expectations about their preparation for retirement. The results reveal a decline in overall confidence about the ability to achieve a comfortable retirement.

Let’s look at some key points:

• Less confidence in retirement: Only 64% of American workers feel confident they have enough money for retirement, a significant drop from 73% in 2022.
• Extremely low confidence: 18% of workers feel very confident in their retirement situation, the lowest level since 2018.
• Financial Concerns: The survey highlights financial concerns that affect confidence, such as inflation, financial market volatility and high health care costs.

These figures highlight the importance of thorough financial planning to ensure a successful transition to retirement. The decline in confidence in retirement is concerning, as it reflects the economic uncertainties facing many Americans.

Inflation, market volatility, and high healthcare costs are major factors contributing to this anxiety.

The RCS 2023 results underscore the need for proactive financial planning for retirement.

Workers must take steps to save and invest appropriately. Diversify your portfolios and seek professional financial advice to ensure a successful transition to retirement.

Working with a Certified Financial Planner is essential to determine the optimal age to retire. Considering factors such as your savings, your sources of income, your spending expectations and the tax impact of your decisions.

According to a report from the American Society for Financial Planning. Individuals who receive personalized advice are more likely to achieve their retirement goals compared to those who make decisions on their own.

Additionally, financial planning will allow you to navigate the complexity of retirement accounts, such as 401(k), IRAs, and Roths. Optimizing the distribution of your resources to maximize your benefits and minimize your tax obligations.

According to data from the United States Census Bureau, people who work with a Certified Financial Planner tend to have 15% more retirement savings compared to those who do not.

In an increasingly uncertain world. Financial Planning it is governed as the most practical and reliable option to ensure your long-term well-being. Working hand in hand with a financial advisor will give you the peace of mind and confidence necessary to make informed decisions and achieve a secure retirement.

Of course, we understand that there are people who prefer to take control of their investments and manage them themselves. Often these people are financially savvy and enjoy autonomy in their decisions, and that’s okay.

However, even the most independent investors can benefit from external validation. Here are some reasons why seeking help to validate your investments is a smart strategy:

1. Objective Perspective: When you are immersed in your own investments, it is easy to lose objectivity. A financial advisor can offer an unbiased view and help you evaluate your decisions from a broader perspective.
2. Avoid Common Mistakes: Even experienced investors can make mistakes. A second set of eyes can point out possible risks or areas for improvement in your retirement strategy.
3. Update and Trends: The financial world is constantly changing. An advisor can keep you up to date with the latest trends, regulations, and investment opportunities.
4. Comprehensive Planning: Investment is only one part of financial planning. An advisor can help you integrate your investments with other aspects, such as taxes, insurance, and estate planning.

In short, even if you prefer to make your own decisions, consider seeking help to validate your investments. A financial advisor can be a valuable ally on your path to financial success.

Redefining retirement: Validating your plan for a prosperous future

Having a plan for your retirement is a fundamental step towards a full and secure life. However, it is not enough to create a plan, it is crucial to validate and optimize it periodically to ensure you are on the right path.

Why seek validation?

Life is full of unexpected events, and your retirement plan is no exception. Factors such as changes in your lifestyle, health conditions, market fluctuations and new opportunities can significantly affect your projections in important ways.

What can you get in a validation?

• Technical analysis and projections: Using specialized tools, make projections about your financial future, taking into account factors such as life expectancy, inflation, health expenses and the performance of your investments.
• Hypothetical scenarios: You can simulate different possible scenarios, considering events such as changes in your lifestyle, serious illnesses or economic recessions, to evaluate the robustness of your plan in the face of unexpected situations.
• Strategy Optimization: They can identify areas of improvement in your current plan and suggest alternative strategies to maximize your savings, reduce risks, and achieve your retirement goals more efficiently.

Benefits of validation:

• Peace of mind: Knowing that your retirement plan is well founded and adaptable to different scenarios will give you peace of mind and confidence to enjoy the present.
• Informed decisions: With a detailed analysis in your hands, you will be able to make more informed and strategic financial decisions to achieve your long-term goals.
• Opportunities for improvement: Validation will allow you to identify areas where you can optimize your plan, maximizing your savings and moving you closer to a prosperous retirement.

Retirement is a life project that requires continuous planning and periodic adjustments. Don’t settle for a static plan, one Financial Planning session per hour, to start validating your plan and optimizing it at each stage!

The idea of a “magic number” for retirement may seem appealing, the reality is that there is no one-size-fits-all formula. The amount you need to live a comfortable retirement depends on various factors and how you structure your assets based on your future plans.

There are strategies that can help you estimate the amount you need and achieve your retirement goals:

1. The 4% rule: This rule suggests that you can safely withdraw 4% of your retirement savings each year during retirement without depleting your money. However, it is important to remember that this is only an initial estimate. Factors such as life expectancy, inflation, and market fluctuations can affect how much you can safely withdraw each year.
2. The sustainable withdrawal rate approach: This method is based on the idea that you can withdraw a fixed percentage rate from your savings each year. Adjusted for inflation, without depleting your money during retirement. The sustainable withdrawal rate is calculated considering your life expectancy, your risk aversion, and your spending goals.
3. The retirement years method: This approach focuses on the number of years you want your retirement savings to last. It is calculated by dividing your current balance by your estimated annual expenses during retirement and you will be able to determine in a very simple way how long your current assets can last without including any important variation in expenses or eventualities.
4. The “bucket” strategy: This strategy divides your savings into “buckets” or segments. Each invested in different asset classes with different risk profiles and time horizons. This allows you to access funds gradually and design strategic planning during retirement. There are studies that support these strategies, such as the one carried out by Vanguard in 2022. I conclude that the Bucket method can help maintain your savings for longer and especially in volatile market environments.

Another 2023 T Rowe Price study analyzed the use of different retirement strategies over a 30-year period and found that the Monte Carlo method and the sustainable withdrawal rate approach provided more consistent and reliable results than the 4% rule.

These studies strengthen the theory that we have of being informed to be able to determine what the financial plan is and the amount that we will need in our retirement. Combine the options, adjust the method that is appropriate to your conditions, there is no perfect method, but surely with personalized financial advice you will be able to find the one that best suits your retirement plans.

We can conclude that retirement is a life project that requires strategic planning and continuous monitoring

There is no single formula that fits all situations, so customizing your strategy is essential. This can only be done with a Certified Financial Planner who can analyze your particular case and provide you with personalized advice. Together, you will be able to validate and evaluate various strategies and tools to determine the best option that fits your needs and objectives.

Beyond statistics and general formulas, the important thing is to validate your retirement plan on a regular basis. Considering the possible changes and scenarios that may affect your financial situation.

This will give you the peace of mind and confidence needed to enjoy a full and prosperous retirement.

Currently there is a very practical trend of hourly Financial Planning that opens an important gap to be able to discuss these matters with an advisor, hiring only the hours you need.

It is a method that consists of dedicating a specific time per hour to analyze, organize and manage your finances strategically. It’s about making financial planning a habit and receiving personalized financial planning.

In short, planning for your retirement is an investment in your future peace of mind. By anticipating and correcting your financial plans, you reduce stress and ensure a secure retirement. Consulting with a financial advisor confirms that you are on the right path toward your goals. Get started today!

Alonso Rodríguez Segarra – CERTIFIED FINANCIAL PLANNER™

Which provides hourly financial planning services, meeting fiduciary and exclusive payment criteria. He has over 20 years of experience in the financial world and has been named among the Top 100 Financial Advisors in the US by Investopedia.

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Note: The comments given in this guide are for educational purposes only. Before making a financial decision, you should consult with your financial advisor or conduct appropriate research. Remember that historical results are not a guarantee of future returns. This guide does not take into account tax impacts in the comments provided. Always consult your particular case with a specialist. We are not your financial advisor and remember that each case is different.

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All rights to this guide are reserved, occasional mention of third-party brand names is made solely for educational and reference purposes, without any interest in financial gain. This information is for educational purposes only and does not represent an offer of products or services.