Skip to main content

A secure retirement— and a Reality Check to make it work

Oct 25, 2016 09:18AM ● Published by Neighbors Magazines

The key to a secure retirement includes two elements, Income and Expenses. The first challenge is to determine the amount of income coming into the household at retirement.

Let’s start with any pensions a married couple may have, followed by Social Security, any guaranteed life income annuities, etc.

Now we look at what they have saved during their working years through 401ks, 403bs or any other tax deferred payroll savings plans they had at their disposal. This is called qualified money. It qualifies for tax deductible and tax deferred status during the accumulation period. Let’s say this particular pot of money is $300,000.

In addition this couple also accumulated another $300,000 by investing as well as an inheritance. This would be called non-qualified money and actually has more value (buying power) than the qualified $300,000 because the qualified money is taxed as ordinary income based on distributions while the non-qualified money does not carry the same heavier tax burden…So the total of these two pots of money = $600,000.

Let’s summarize our monthly income and Federal taxation. Pension = $1,000 fully taxable, Social Security $2,000 includes both husband and wife partially taxable, Annuity $1,000 some potential taxation, depends on type, qualified $300,000 (annual distribution rate of 3.5%) = $875 fully taxable, non-qualified $300,000 (annual distribution rate of 3.5%) = $875. Total income = $5,750 and overall estimated 15% Federal income tax of $862 = $4,888 net per month. It’s important to remember that a spousal death could alter the pension and will definitely reduce the Social Security by the smaller of the two benefits.

Now the expenses: They would be more readily adjustable. Here is a thought if you are one to five years from retirement. Establish what you believe to be your reasonable expenses during retirement. Let’s say you settle on net income needed of $4,000 per month...Now establish a plan to live on $4,000 net per month while you are still working. Here is an opportunity to test your formula. According to the above income example it should work.

However, there are some other considerations. In other words the Reality Check. Medical expenses and premiums. Inflation which erodes purchasing power, and life being life the purchase of a car, a new roof, appliances, travel to see the grandkids, etc. In other words, real life happenings.

My experience has been that it many cases (not all) it usually takes more income and assets in retirement than originally anticipated.

So what are some potential options?

• Reduce expenses through changing lifestyle spending habits.

• Reduce expenses through debt reduction, credit card payoffs, etc.

• Take part-time work.

• Balance investment portfolios to reflect your needs. If the need is income let the portfolio reflect that need, according to your comfort zone.

• Increase the distribution rate on the investment portfolios but that could add risk for depleting the portfolio in the future. However each situation is different.

• Delay retirement, which can sometimes increase the pension benefit and the Social Security benefits.

• There are Reverse Mortgages but one has to be careful and fully understand the contract. Professional guidance should be sought from a third party.

• Downsize your home to something or somewhere less expensive. (See below)

 

Evaluate yourself by your own standards, not by somebody else’s

                H. Jackson Brown Jr.

John Masus CLU, ChFC, CFP is an LPL registered principal with clients in 24 states. Securities offered through LPL financial, Member FINRA/SIPC. Masus Financial Group, Ltd. is a registered investment advisor, a separate entity from LPL Financial. You can email John.Masus@lpl.com we have been located in downtown Batavia for over 23 years.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Past performance is not indicative of future results.

Business Nuggets, News Income Expenses Pension Social Security
  • Tri-Cities Exchange Club Breakfast

    09/26/2017
    07:00AM — 08:00AM

    Every Tuesday morning, 7-8am, men and women meet for breakfast at Colonial Cafe on Randall Road, ...


  • Coat Drive

    09/26/2017
    08:00AM — 05:00PM

    Please help those in need in our community with donations of new or clean, gently-used winter ite...


  • Sculpture on the Prairie

    09/26/2017
    10:00AM — 05:00PM

    Fine Line Creative Arts Center is proud to annouce it's first Sculpture on the Prarie exhibit. E...


  • Wednesday Walking Club

    09/27/2017
    08:00AM — 09:00AM

    Wednesdays, April 5–October 25, 8–9 AM Free drop-in program for all ages Get fit the old-fashio...


  • Wednesday Walking Club

    09/27/2017
    08:00AM — 09:00AM

    Wednesdays, April 5–October 25, 8–9 AM Free drop-in program for all ages Get fit the old-fashio...


  • Coat Drive

    09/27/2017
    08:00AM — 05:00PM

    Please help those in need in our community with donations of new or clean, gently-used winter ite...


  • Sculpture on the Prairie

    09/27/2017
    10:00AM — 05:00PM

    Fine Line Creative Arts Center is proud to annouce it's first Sculpture on the Prarie exhibit. E...


  • Fabyan Villa Museum & Japanese Garden open

    09/27/2017
    01:00PM — 04:30PM

    The Fabyan Villa Museum and Japanese Garden will return to a public hours schedule starting on Su...


  • Million Dollar Quartet

    09/27/2017
    01:30PM

    Paramount Theatre's rollicking 2017-18 Broadway Series opener is Million Dollar Quartet, the wild...


  • Coat Drive

    09/28/2017
    08:00AM — 05:00PM

    Please help those in need in our community with donations of new or clean, gently-used winter ite...


  • Nature Tykes (for 3 year olds)

    09/28/2017
    09:30AM — 10:30AM

    In this program, for 3-year olds and their parents, grandparents or guardians, we’ll explore the ...


  • Sculpture on the Prairie

    09/28/2017
    10:00AM — 05:00PM

    Fine Line Creative Arts Center is proud to annouce it's first Sculpture on the Prarie exhibit. E...


  • Fabyan Villa Museum & Japanese Garden open

    09/28/2017
    01:00PM — 04:30PM

    The Fabyan Villa Museum and Japanese Garden will return to a public hours schedule starting on Su...


  • Little Naturalists

    09/28/2017
    01:00PM — 02:00PM

    In this hour-long program for 4-5-year olds, children will discover the wonders of nature through...


  • Million Dollar Quartet

    09/28/2017
    01:30PM

    Paramount Theatre's rollicking 2017-18 Broadway Series opener is Million Dollar Quartet, the wild...


  • Please join the Batavia Chamber of Commerce, Batavia Mayor Jeffery Schielke, and Batavia represen...


  • Comedy at Zanies

    09/28/2017
    08:00PM

    See nationally known comics along with some of the country’s hottest new talents for a night full...


  • Coat Drive

    09/29/2017
    08:00AM — 05:00PM

    Please help those in need in our community with donations of new or clean, gently-used winter ite...


  • Moms Connect

    09/29/2017
    09:00AM — 10:15AM

    St. John Lutheran Church at 7214 South Cass Avenue in Darien, IL will sponsor a new Bible-based s...


  • Sculpture on the Prairie

    09/29/2017
    10:00AM — 05:00PM

    Fine Line Creative Arts Center is proud to annouce it's first Sculpture on the Prarie exhibit. E...


  • Story Time at Creek Bend Nature Center

    09/29/2017
    10:30AM — 11:00AM

    Treat your child to Story Times at Creek Bend Nature Center. This popular program series is for c...


  • Million Dollar Quartet

    09/29/2017
    01:30PM

    Paramount Theatre's rollicking 2017-18 Broadway Series opener is Million Dollar Quartet, the wild...


  • Comedy at Zanies

    09/29/2017
    08:00PM

    See nationally known comics along with some of the country’s hottest new talents for a night full...


  • Live Entertainment: DJ

    09/29/2017
    09:00PM — 11:55PM

    Join us on historic Bourbon Street in Jambalaya at Pheasant Run Resort every Friday for live ente...


  • LEHSO Resale

    09/30/2017
    07:00AM — 02:00PM

    LEHSO Clothing Resale The Lisle Elementary Home & School Organization clothing resale is a bia...


  • The Holmstad’s 40th Annual Bazaar

    09/30/2017
    09:00AM — 03:00PM

    The community is invited to wrap up their holiday shopping early by stopping in at The Holmstad’s...


  • Sculpture on the Prairie

    09/30/2017
    10:00AM — 05:00PM

    Fine Line Creative Arts Center is proud to annouce it's first Sculpture on the Prarie exhibit. E...


  • Green Fair

    09/30/2017
    10:00AM — 04:00PM

    Eco Vendors, Farmer's Market, Recycling Extravaganza, Green Speakers, Food Trucks, Children's Mak...


  • National Public Lands Day

    09/30/2017
    10:00AM — 01:00PM

    Volunteers are needed to help us plant trees, collect seeds and clear brush at our National Publi...


  • Million Dollar Quartet

    09/30/2017
    01:30PM

    Paramount Theatre's rollicking 2017-18 Broadway Series opener is Million Dollar Quartet, the wild...


  • Comedy at Zanies

    09/30/2017
    07:30PM

    See nationally known comics along with some of the country’s hottest new talents for a night full...


  • St. Charles Singers: Mozart Journey XII

    09/30/2017
    07:30PM — 09:00PM

    The St. Charles Singers will launch its 34th concert season this fall with a new installment of t...


  • Live Music

    09/30/2017
    09:00PM — 11:55PM

    Join us on historic Bourbon Street in Jambalaya at Pheasant Run Resort for live bands every Satur...


  • Comedy at Zanies

    09/30/2017
    09:45PM

    See nationally known comics along with some of the country’s hottest new talents for a night full...


Neighbors Magazines
Neighbors Magazines, 28 South Water Street, Batavia, IL 60510, 630-995-3482, www.welcometoneighbors.com
Contact us