When you get serious about retirement, one important question is, "How much savings will I need?" Even if you plan to rent out farmland for retirement income, you still need a nest egg.
Part of the challenge to answering the "how much is enough" question, is accurately predicting what your retirement will look like. There are a few moving parts to consider:
- What are your basic living expenses? You really need a good handle on what it takes to live the way you wish as you enter retirement. And yes, this may require a BUDGET.
- What income assumptions do you have? Are you planning to rent out farmland in retirement? What assumptions have you made about fair market rent levels over the next 10 years, 20 years, 40 years? What if rent values fall by a third? How will you be able to adjust and maintain your lifestyle?
- What major expenses could pop up during retirement? Do you have any deferred maintenance on your home? Do you have any potential health issues that could emerge? Do you have any children or grandchildren who might expect your support?
Yes, this stage of planning is really a great point to engage with an independent, fee-only, fiduciary financial planner. They can help you factor all these issues into a solid plan that gives your nest egg the very best possible chance of meeting your true needs. Your retirement income plans should include the following:
- Realistic living costs based on the way you want to retire and including things like:
- Vacation home;
- Fishing boat;
- Vacation trip(s) of a lifetime; and
- Gifts to family.
- Assumption that you will both live to 100.
- Impact of inflation over the next 30 to 40 years during retirement.
- An investment strategy designed to provide sustainable income in good years and in bad.
- A plan to manage the cost of long term health care.
Remember, the failure to plan is a plan to fail, so take the time, now, to make a solid retirement income plan. A quality advisor will help you work through the process and be sure you avoid common traps. When you do that, your nest egg will be a lot happier.
Contact my office to discuss your nest egg at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.