posted in: Safety

A Retirement Preview

If you could preview your retirement on DVD or Blu-ray, would it show you living comfortably or struggling to make ends meet? Which of these two scenes will actually play out some day will depend on your retirement income.

Make your own projection 

You may not intend to retire for many years, but this is still a good time to plan. The sooner you take a hard look at your financial situation, the more time you’ll have to make any needed adjustments. To see a rough-cut of what your future retirement might look like, just compare the retirement income you anticipate against your likely cost of living during retirement.

Determine how much you need to save each month to reach your retirement goal with our Destination Retirement calculator.

Your future income — from where and how much?

You may have several sources of retirement income:

  • Social Security. It’s safe to assume Social Security won’t disappear, although changes in the amount, timing, and taxation of benefits are possible. If you’re 25 or older, Social Security sends you an estimate of benefits once a year. You can also request one at Social Security Online, or call to get a request form (1-800-772-1213) and mail it to Social Security.
  • Your retirement plan account. You can use a calculator or other tool to project the balance of your retirement plan account at the age you expect to retire and to estimate the income you’ll be able to draw from your assets annually.
  • Any other pension benefits to which you may be entitled. If you participate in another plan, ask the plan administrator for information about future benefits.
  • Individual Retirement Account (IRA) or other investments you may have.
Your future income needs

To look at your retirement income needs, you need an idea of how much you’ll be earning – and spending – at the end of your career. Yes, your living costs may be lower after you retire because of savings on work-related expenses like commuting and payroll taxes. However, inflation after retirement may increase your income needs, and some costs, like medical care, will probably increase, too. Unless you plan to change your lifestyle, you may not want to anticipate a significant drop in your cost of living after you retire. To estimate your pre-retirement earnings, multiply your current pay by a growth factor from the table (above). Many planners say the average retiree needs 70%-80% of pre-retirement income to live comfortably.

Projecting the growth of your pay
  Average Annual Pay Increase
Years to Retirement
 3%    4%  5% 
6%   
10 1.34 1.48 1.63 1.79
15 1.56 1.80 2.08 2.40
20 1.81 2.19 2.65 3.21
25 2.09 2.67 3.39 4.29
30 2.43 3.24 4.32 5.74
35 2.81 3.95 5.52 7.69
40 3.26 4.80 7.04 10.29
Should you do some editing?  

Comparing your estimated future income with your estimated income needs will give you a rough-cut of your financial future. If the income looks like it will be too low, think about the editing possibilities you have now and read the following suggestions.

Redirecting your financial future

Here are some actions you can take now that may make your retirement more comfortable:

  • Review the investment options for all of your accounts
  • Adjust how your accounts are invested in order to increase the potential for growth
  • Make sure that your current investment mix still reflects your time frame and risk tolerance
  • Check the progress of your accounts regularly and rebalance your investments when needed to restore your asset allocation
  • Find ways to invest more money toward retirement
Putting it all together

There are a lot of parts to your future retirement, and COUNTRY Financial® can help you put it all together. With a tangible plan that optimizes your entire financial picture, you'll get the guidance you need to make informed decisions as you save and invest for your family's financial security tomorrow.

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May lose value

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Investment management, retirement, trust and planning services provided by COUNTRY Trust Bank®. Please see our Terms & Conditions for more information about COUNTRY Trust Bank and its affiliates.