From the desk of Rio Vista REALTOR Ralene Nelson: I work with people getting ready to retire everyday. I represent buyers looking for a home for sale in Trilogy at Rio Vista. Trilogy is a great place to retire; it’s security gated and safe, sits right on a golf course and is just 25 minutes away from city life.
Many folks approach retirement by asking, what percentage of my current salary will I need to replace? That percentage is usually less than 100, as most envision costs falling in retirement—the kids are grown, big loan obligations are almost complete, they aren’t commuting anymore and life gets simpler.
A majority of workers surveyed believe they can live off of 70% of their pre-retirement income. Yet some warn folks are vastly underestimating their future expenses. Who’s right? Well, it depends—everyone’s situation is unique. There is no one cookie-cutter salary replacement ratio that will work for everyone.
Taking stock of your current costs and income sources and projecting them forward can give you a better idea of what you’ll need from your portfolio during retirement.
First, you’ll need to figure out your costs, both fixed (like a fixed-rate mortgage or medicines) and variable (utility bills). You should also identify discretionary costs, too—if an unexpected expense arises or if returns aren’t what you projected, this would be the first place to make adjustments.
Factoring in your current costs, as well as planning for future ones (e.g., a grandchild’s tuition, traveling the world and/or remembering health care expenses rise as you age) will give you a sense of what your portfolio needs to provide.
Granted, nobody can predict their future expenses perfectly—life changes. But having a plan in place will put you in a better position to avoid any nasty surprises.