Identifying Your Future Income Deficit
By C.I.S. Inc.
There’s no one set of rules when it comes to retirement planning. A sustainable retirement plan varies from person to person and so does their future income deficit. Stated plainly, your future income deficit is the amount of money you currently need to save in order to have the amount of money you need throughout retirement. There are ways to approximate your retirement income needs by assessing the money you currently have and your retirement expectations.
The first step in identifying your future income deficit is establishing when you’re going to retire. Secondly, determining how much money you will have from your primary sources of income (such as Social Security, Pensions, 401k, 403b, etc.). From there, calculating how much income is needed throughout the course of your retirement.
You should know that social security wasn’t designed to provide you with 100% of your retirement funds. In fact, it only grants roughly 40% to 60% of your retirement expenses. If you do not address the remaining percent, you will fall short of your monetary goal needed to retire.
Do you need more money than what is expected from your primary sources of retirement income? If so, how much do you need to save between now and the time you retire?
We can help figure out what you need to do to get there. Working with an advisor would be a wise way to build a plan that helps reduce your income deficit. The sooner you begin the planning process, the easier it will be to reduce your deficit to zero.
You can start the planning process by using this income deficit calculator. The calculator provided will help you determine how much you need to save and whether or not you’ll fall short. Retirement is like the ultimate vacation. You’ve worked a long time up to this point, but before you can take the trip, you need to know how much to save.
We can also help track your projected expenses and income throughout your retirement. Do you know how much money you will get in your first year of retirement? What about year 2? What if you live longer than expected? What if you get injured? What if you have grandchildren? Do you want to leave them money for their education or future weddings?
Knowing the total amount of money you’ll need for your retirement and approximating your costs is imperative.
It’s important to reiterate that you can’t skip steps in the retirement process. You can’t know your income deficit without knowing when you’re retiring, how much money you’ll have at retirement, or how much money you’ll need at retirement. A study from the Center for Retirement Research found that “people tend to maintain their pre-retirement spending when they first retire, but then cut back sharply thereafter. This pattern reflects the fact that, except for those with very high incomes, [retirees] lack adequate resources to maintain their initial levels of consumption throughout the retirement period.” Statistically, most people don’t properly plan for their retirement expenses. When you reach your age of retirement, will you be prepared? No one wants to run out of retirement money unexpectedly and calculating your future retirement deficit is the best way to solve that problem. Our helpful representatives can assist with any questions you might have.
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Copyright 2015 – This article is for educational purposes only. This is not for tax or legal advice. This is not a solicitation to sell or purchase any product. This content is property of C.I.S. Inc. and may not be copied, reposted or redistributed without written permission.