Will I Run Out of Money If I Retire?

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When it comes to planning our retirements, many of us lose sleep over what will happen when we no longer have regular paychecks coming in and have to rely on our investments. We often struggle with making the transition from working full time to retirement — and plenty of pre-retirees can’t even imagine life without a salary.

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All of us face a number of questions as we move through our 50s and early 60s.

Can I quit working?
Is it OK if I retire?
I want to retire in the near future, but can I afford to?
How do I make sure the money I have saved my entire life is going to last?
Do I have enough saved?
When should I start taking Social Security?
How much should I take from my portfolio?

We all have questions, and none of us knows all the answers.

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Income is the answer

That’s where a good retirement planner can help. Simply put, the cornerstone of any good retirement strategy is income planning. So much of our retirement hopes depend on how we manage our money, especially since most of us want to continue living our current lifestyles while in retirement. We want to stop working, have enough income to remain comfortable even without paychecks coming in, and, most important, know we are financially secure. We want to know we are on the right path and ensure we don’t outlive our money, something that is increasingly common as people live longer.

No matter how good we are at managing money, many of us simply don’t understand how much we are going to need to withdraw from our portfolios to enjoy a comfortable retirement. We look at our expenses from our working years and come up with a guess.

But, even with all our number crunching, we often underestimate how much we will actually need to sustain our lifestyles in retirement. Too often, we tell ourselves that we will spend less in retirement, but that’s not the case for many of us, especially if we want to travel or do things we never had a chance to do while working. We also do not factor in rising medical expenses and long-term care costs.

Ensuring a comfortable retirement

All of this underscores why a retirement planner should be consulted. A good one can offer a realistic appraisal of your finances and your lifestyle to ensure you enjoy a comfortable retirement, instead of just giving you strategies to withdraw a certain amount of money each month from your portfolio.

A retirement planner also can offer you a survivability analysis, which provides answers on what happens to Social Security, pensions and other sources of income that could be lost when a spouse passes away. As unpleasant as it is to think about, you need to consider what will happen if a spouse is left on his or her own and factor that into your plan.

An experienced and knowledgeable retirement planner also can help you turn your savings into income. Many of us have structured our income plans for retirement on the assumption that the stock market will consistently go up. Of course, as anyone who remembers 2008 can tell you, that’s not going to happen. You need to make sure your retirement can survive the volatility that remains a core part of the market. A retirement planner can help you examine how much downside there is to your investments and how much risk you can manage, helping ensure you have a secure retirement. He or she can stress test your current financial plan and analyze where you might be vulnerable.

By looking at your income and analyzing your lifestyle needs, retirement planners can help you find the right path to a secure retirement. When you draw closer to ending your career and starting on this next step of life, you should consult a retirement planner.

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Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Tad Hill is the founder and president of Freedom Financial Group, a retirement planning firm in Birmingham, Ala. Hill is a Chartered Retirement Planning Counselor (CRPC®) and a Registered Financial Consultant (RFC). His clients are those who are either already retired or who are within five or 10 years of retirement.