A comprehensive retirement plan is like a house. It will take into account your financial well-being both now and for the rest of your life. But like any house, your retirement house has to start with a foundation. Your income is that foundation. The first step to laying that foundation is determining how much income you need..
- Now it is time to think about the two kinds of income: Nest Egg and Cushion income.
- Nest Egg income. This is the amount that you need to plan for to pay for your day-to-day bills and expenses (mortgage, car payments, utilities, groceries, entertainment, travel, etc.). When trying to figure this out, it may be helpful to get out your checking and credit card statements and figure out exactly how much you’re spending. You would be surprised by how many people estimate that they are spending $4000 per month, but in reality are spending between $5000 to $6000 each month. At LaTour Asset Management, LLC, our goal in creating a retirement plan is to ensure that you can potentially live a peaceful retirement. We want you to continue the lifestyle you are living now, or even increase your lifestyle. With all of those pesky work hours gone, you’ll have more time to enjoy yourself. We want to be sure that you can afford that, and not worrying over every little expense.
- Cushion income. Some people call this your emergency fund. This is not money that you need for your monthly expenses, but can be immediately available in case you have an extra expense. These expenses range from a new roof to a cruise with the grandkids. Everyone’s Cushion income needs are different. Some advise three to six months of monthly expenses as a guideline, but that can be too specific. You might plan to do a lot of traveling in your early retirement years when you are most able to enjoy it. During those years then, we might need to set up a larger Cushion account than we will for later years. It’s your money, and your plan should begin and end with you.
Then, you need to figure out what assets you have. This includes your savings, investments, real estate holdings, etc.— anything that can be positioned to produce income. Every financial strategy for retirement needs first to accommodate the day-to-day need for income. The moment your working income ceases and you start living off the money you’ve set aside for retirement is referred to as the Retirement Cliff. You have just transitioned from the accumulation phase of your life into the distribution phase of your financial plan. On day one of retirement, you will need a steady and reliable supply of income from Green Money.
So how do you figure out how much you need and when you will need it? When you take into account the changes in expenses at retirement, you can really give your calculator a workout. You can start by meeting with an Investment Advisor Representative to organize your assets. Get your Colors of Money in order and balanced to meet your needs. If the market goes down 18 percent next month, you don’t want that to come out of what you’re relying on for next year’s income.
Call today 417-886-5724 to schedule an appointment with one of our Investment Advisor Representatives.
Retirement is too important for guesswork.