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How Much Money Do I Need to Retire?

Year after year, this is the number one question I am asked. Of course, there is no single answer for everyone. Just as we have income and expenses unique to our households during our working years, we will have our own income and expense needs, when we retire. The closer you are to retirement, the more likely your expenses will not change significantly. If you have several years before retirement, you will be affected by inflation, changes in family dynamics, debt balances, and career changes. However, there are some basic strategies that can help you to plan for your future needs.

The goal is to have enough guaranteed, predictable income to cover your basic cost of living expenses. This includes utilities, phones, TV and internet, insurances, food, gas, etc. These are the expenses you cannot do without. The more you can cover with guaranteed income, the longer your other assets will last. Ideally, your retirement assets would then be available to pay for such things as travel, home remodeling and repairs, and autos and recreation vehicles. And let’s not forget about medical expenses. By having basic needs covered with social security, pensions, and annuity payments, you may not have to deplete your assets every month to cover the shortage. You can start planning for your income needs several years before you retire, by analyzing your current budget, and determining how much of it you will still need in retirement.

· Basic Needs (utilities, phone, TV, food, gas, etc.)
· Insurances (Auto, Home, Medical, Life, Long Term Care)
· Property Taxes / Rent / Association Dues
· Credit Cards/ Personal Debts
· Mortgage

The goal is to reduce required expenses to:
· Basic Needs (utilities, phone, TV, food, gas, etc.)
· Insurances (Auto, Home, Medical, Life, Long Term Care)
· Property Taxes / Rent / Association Dues

The timing of your retirement depends on what your expenses will be and the income sources you will have available to match that amount. Determine your social security benefits by going to ssa.gov to view your benefit options. You will see your benefits at age 62, your full retirement age, and age 70. This will give you a starting point. Compare these figures to your Retirement Expenses Goal. If you are still going to be short, perhaps you may be eligible for some pension payments to add to the social security. If you are still going to be short, you may want to talk to a CERTIFIED FINANCIAL PLANNER to help you evaluate how to adjust your current expenses, and possibly look at the need to supplement your future income with an annuity that will pay additional guaranteed lifetime income. For some, part time work may be another option.

Financial planning, years ahead of retirement, can help you determine a strategy that can work toward having your mortgage and other debts paid by the time you retire. Having no debt, when you retire, will reduce the amount of your monthly expenses, and allow you to have more choices in how, and when you spend your accumulated assets. You will need to consider the effect of Required Minimum Distributions (RMD) on your retirement accounts. At 70 ½, you MUST withdraw an increasingly larger portion each year. Roth IRA’s are not subject to RMD, which gives you flexibility and more control over taxes.

Medical expenses are anticipated to be a significant portion of our retirement expenses. You will need to have medical insurance, as well as a means of covering out of pocket expenses and the cost of long term care. If you are still working, and have a Health Savings Account available, contributions will reduce your current taxes and withdrawals will be tax free for medical expenses.

So, to summarize, my advice to clients is this:
A simple strategy to fund your retirement includes:
1 BASIC NEEDS: Guaranteed lifetime income sources (social security, pension, annuity)
2 LIFESTYLE NEE DS: Distributions from accumulated assets
3 MEDICAL NEE DS: Insurance and a Health Savings Account

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. * Securities offered through LPL Financial, Member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates. Old National Bank & Old National Investments are not registered broker/dealers and are not affiliated with LPL Financial. Old National Bank, Old National Investments, and LPL Financial are separate entities. -Not FDIC Insured -Not Bank Guaranteed -May Lose Value -Not insured by any Federal Government Agency -Not a Bank Deposit

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