Answering retirement questions and planning for your retirement can seem complicated, time-consuming, and overwhelming.
Traditionally, most Americans have had two options: paying around $2,000 to get a financial plan from a fee-for-service financial planner or getting a one-time financial plan from an advisor that would likely never be updated again. The second option is generally only reserved if you have more than $100,000 to your name in investable assets to make it well-worth the advisor’s time.
Why is good financial planning so hard to come by? Because it’s so incredibly complicated. Insurance, debt, borrowing, mortgages, children, 529 education plans, taxes, 401(k)s… the list of confusing financial considerations continues to compound, pun intended. So, it’s no surprise that when it comes to your own retirement, there are often lots of gray areas that are unknown.
Here are 4 retirement questions that you definitely need to answer for yourself, and unfortunately, 4 retirement questions that most people can’t answer:
1. When will I be able to retire?
This is a question that almost nobody knows the answer too (especially with any degree of confidence and accuracy). Almost no one knows what to do on a monthly basis to maintain their lifestyle and to make sure that they can continue living that same, or similar, lifestyle throughout their retired years.
Unfortunately, not being able to answer this with confidence and having a financial plan in place to back it up can lead most people to experiencing a significant lifestyle decline when they put their kids through school, purchase a home, when they retire, or experience something unexpected.
There are many retirement calculators online that promise to produce your ideal retirement age with a few simple clicks, but retirement really isn’t a one-size-fits-all calculation. The only way to know your exact retirement age and your retirement options is to build a comprehensive financial plan, and to make sure that you’re keeping your plan updated regularly, or at least every time significant life changes occur.
2. How much money should I be putting away to be able to maintain my lifestyle in retirement?
You can probably already see the theme starting to develop here — there’s no one-size-fits-all solution when it comes to planning for retirement. Everyone’s situation is extremely different and rules of thumb, like saving 10% of your income, can sometimes become quite dangerous as they may only apply to a small group of people.
According to a report from Forbes, 69 percent of Americans have less than $1,000 in savings, and 34 percent have absolutely nothing at all tucked away. One thing for certain is that having something saved is a lot better than nothing at all; but even so, it seems most Americans lack the proper financial advice and guidance to get them started in the first place. This makes it extremely difficult to know just exactly how much you’ll need and how to figure out those “magic” numbers.
That being said, a lot of things go into calculating how much you will need in retirement and how much to save to get there. When you build your financial plan with Savology, we’ll look at dozens of things including, but not limited to:
- Current income
- Age of kids
- Current lifestyle
- Current savings
- Insurance coverages
- Marital status
- Mortgage or rental status
- Government benefits
3. How much money can I rely on from the government in retirement?
One of the most common mistakes Americans make is overestimating how much they will actually receive in Social Security benefits during their retirement years. Unfortunately, it’s likely you’ll have far less than you think. In fact, the maximum monthly benefit for workers retiring in 2020 at the full retirement age is $3,011, but the average amount received in 2019 is far lower than that maximum at just $1,470 per month or $17,640 per year.
Similar to the simple retirement calculators out there, there are many Social Security tools online that will take your current age and then project it out by “x” number of years without layering the income sources, or taking into consideration any clawbacks.
The best way to avoid overestimating how much Social Security you will receive is by building an accurate financial plan that will actually do the calculations for you to show you how it impacts your overall retirement outlook.
4. How will I cover any illnesses or accidents as I approach, or during, retirement?
It’s not news to anyone that along with age comes increased risk of illness and injury. The costs associated with a critical illness or disability are often detrimental to someone’s financial goals, if they’re not properly protected.
Having the proper insurance implemented at each different stage in life is crucial to ensuring your financial plan stays the course. That’s why, here at Savology, we’ve partnered with some of the top insurance providers to help make sure that having access to insurance policies that meet your situation doesn’t seem like a challenging process.
While ensuring you’re covered during your higher risk years, starting out with insurance when you’re young and single is often one of the best ways to ensure you hit all of your financial goals throughout your life. In addition, when you’re young and healthy you’re often able to lock in a more affordable policy that can remain stagnant in cost all the way up to retirement.
So, what’s next?
Saving for retirement and financial planning are topics filled with financial jargon and a lot of questions that many people can’t answer. The best way to get yourself familiar with the answers to many of your financial questions is by building your free financial plan. We’re positive you’ll be thankful you did. Your future-self will thank you and your current-self will have some of those tough questions answered.
Your financial future starts today
Savology has helped more than 40,000 households across the United States improve their financial well-being by providing comprehensive digital financial planning. Users can get started with our free financial planning or premium monthly planning memberships, allowing them to build a personalized financial plan, holistic report card, personalized action items, and more. In addition to our consumer-facing platform, we’re helping employers across the country provide their employees with effective financial wellness benefits.