It’s a rule of thumb used by many financial experts that says this…
During the first year of retirement, retirees should withdraw just 4% of their savings.
There are two problems with this line of thinking…
1) What if I plan on living past 25 years in retirement?
2) 4% of savings isn’t that much
According to the Federal Reserve, the average person nearing the retirement age of 65 only has, on
average, $103,000 saved in the bank.
This above chart reflects how little retirement savings most Americans have.
Imagine living off 4% of $103,000… that’s only $4,120 per year (or $343 per month).
There are a lot of families and individuals all over the world who are struggling financially at some point in their lives. The good thing is that you can come up with a financial planning strategy to get over whatever financial problems you are facing. Below is a guideline for a good financial planning strategy:
Start Investing For Retirement As Soon As Possible
The very first thing that you should do in your financial planning strategy is to start immediately. Whatever reason for your delay in planning your budget and expense will only cause you to lose your eagerness in the idea of getting your finances organized. Regardless of your situation, it is still best to start with your plans right now.
- First, take stock of what you currently have. Write down all of your assets like cash, stocks, car value, and home equity.
- Second, what debt /expenses do you have that you want to pare down? Write down all of your expenses and liabilities. Taking note of this information will give you a good picture of your financial situation.
- Finally, make a list of your financial goals (both short term & long term). Once you know your situation and know where you want to be, then you can start searching for your options.
Evaluate Your Financial Planning Strategy Options
After knowing where you stand financially, you need to consider all of your options in financial planning before proceeding.
- Savings & Interest – it’s not always about just getting to a retirement savings number and then depleting it at ‘4%’. What if you could get to a financial savings number… and live off the interest? Keeping money a high interest accruing asset and living off a higher interest rate will prevent you from depleting your bank accounts. Plus, you’ll be able to live longer than 25 years in retirement without running out of money.
- Paying Off Debt – the cash flow ‘profit’ equation is simple: revenue – expenses = net income during retirement. Paying off debt will allow you to have more monthly cash flow. So, what does this have to do with investing for retirement? What if you could use your ‘retirement savings’ to pay off debt… and still earn interest?
- Life’s Little Emergencies – as the old adage goes… “Man Plans… God Laughs“. No matter how much planning you do, the only thing that you can expect is the unexpected. How would you like to have an asset that you invest in that will assist you through tough, unexpected life events… that will still earn interest for you while you save for retirement?
If you’re seeking alternative ways for investing for retirement, paying down debt, earning a respectable interest rate while still having money to pay for a child’s education (or any other surprises that life throws your way), then you definitely deserve to speak with a financial planner in Texas who can provide you with options.