Many people are fearful of retirement and may endure sleepless nights, wondering, “What is the right amount of money to retire?” My team and I want to help spark a real movement to change this old way of thinking about money and the unhealthy fears surrounding our money. The whole point of our philosophy is to help support people in finding ways to live life in the now and help achieve a mental state of retiring while you work.

A big problem is that we tend to believe this “magic number” myth for retirement: for example, take the classic “65 years old” retirement age. I would say, 95% of the time, the “magic number” in our head is based on some arbitrary number, or comparison to other friends or coworkers, or a magazine article…not from a true financial planner. My point is that to figure this number out, you really should sit down with a CFP® professional and go slow, deep, and build a custom plan.

In reading a article entitled, “How to make sure you have enough money in retirement,” I studied their 5 major points to consider when trying to make sure you have enough to make it last, and added my thoughts to add some “color:”

1. Save 10 times your salary for retirement.

If you want to be able to maintain your pre-retirement lifestyle for as long as you live, you should aim to amass 10 times your final salary in savings by retirement. If you’re not there yet, don’t panic. Just try to sock away 15-20 percent of your income each year. Consider reducing your current cost of living to make it happen. Yes, it’s that important.

You can know if you’re on the right track with your retirement fund if you can hit these benchmarks:
At age 30: 1x your salary
At age 40: 3x your salary
At age 50: 6x your salary
At age 60: 8x your salary
At retirement: 10x

2. When you retire, keep withdrawals at four-ish percent.

Ask soon-to-be retirees how much they think they can pull out of their retirement plans each year and the numbers are double or sometimes triple that much. That’s a recipe for running out of money fast. The “ish” exists because during years when the markets are down, you’ll want to withdraw a little less (3.5% or so), but in years when your portfolio is doing well, you can pull out a little more (4.5% or so).

What I’ve seen is that pulling 3% or so, picking up a second, part-time career instead of quitting work altogether upon retirement from your first career, then supplementing with social security can be beneficial to maintaining your retirement fund.

3. Know what you mean by retirement.

The folks at AgeWave and Merrill Lynch recently conducted a large piece of research on finances in retirement. They found that many people who say they’re retired are still earning an income working part-time instead of full-time or taking sabbaticals along the way. If this is how you envision retirement, it means your money can stay in your retirement accounts longer and continue to grow. It doesn’t have to be “all or nothing!”

4. Course correct.

The AgeWave research also looked at what happened if people made changes that would enable them to dramatically reduce their cost of living now and save more for later. A pack of cigarettes a day, for example, given up at 35, means $360,000 more at 65 (plus greater health, of course.) A 60-year-old couple planning to retire decided they’d each work part time, 20 hours a week, instead. That gave them $300,000 more for retirement and enabled them to take Social Security later. A 65-year-old couple ready to retire sold their $325,000 New Jersey home and moved to South Carolina where they bought a $115,000 home for cash. Adding the savings in property taxes and the cost of living, it saves them $28,000 a year in living expenses. Weekly, we see ways in our office to make trade-offs and give people so many options they didn’t even expect, allowing the idea of retirement to be dynamic, not some static dollar amount or age.

5. Maintain an emergency cushion.

We used to think that if you could get rid of the emergency cushion, you weren’t working anymore. The trouble is…that may not give you enough flexibility to handle the car bill, a large unexpected medical expense, or home repair. Having some money set aside specifically for these emergencies in retirement can be a life-saver. We always talk about the 3 buckets of money – bucket 1 is the emergency fund and perhaps the most important. Let’s face it: Life happens! Have 3-6 months of expenses sitting aside in a savings account- cash is always king!

There you have it! I hope my thoughts help you rest easier at night, plan for the future, and truly retire while you work.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of David Adams and not necessarily those of Raymond James. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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