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Figure Out a Retirement Plan (if 50 or over)

It's a 3-step process: 1) Define the retirement income you need. 2) Decide how to get it. 3) Get it done. 

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Your Retirement Income Plan

How to Get What You Need

You need a monthly income to stay in your house, pay your taxes, keep your car on the road, and remain active in your community.  Not just now but for the rest of your life and (if not single) for the life of your survivor.

The calculator below helps you develop a Retirement Income Plan by providing Quick Estimates using standard rules-of-thumb, that you can correct, of:

  • The monthly income you need 
  • Your current monthly income from Social Security, employer pensions, rents, etc., and the income you might get from your savings
  • How you might add to your income and cut your expenses (and thus the income you need) if you downsize or adopt a less expensive lifestyle

For better estimates, and estimates of what you could get from a reverse mortgage or government benefits,  use the tools in the TOOLKIT below.

In ADVANCED you can 1) enter those estimates or other corrections to update your Plan and 2) also see if your survivor (if you’re not single) will have the income he or she needs.

Set the Monthly Income You Need

The First Step in Your Retirement Plan

A rough rule-of-thumb says you need 75% of what you earned while working.

If you earned $50,000 a year, the rule-of-thumb says you need about $37,500 a year, or $3,130 a month (all figures rounded to the nearest $10) rising in line with prices. 

For an estimate of how much you need, replace the $50,000 in the example  with your pre-retirement income and that of your spouse (or partner) if you’re not single.  

You can then correct that rule-of-thumb estimate, if you like, by entering “YOUR FIGURE” for your Monthly Retirement Income Target.

Please fill all required fields
    header-small Your Monthly Income Target  
    header-column Pre-Retirement Income You Spouse Total
    input results-small Yearly Income
    input results-small   Monthly Income  
    gap     
    header-column Retirement Income Target Your Figure Target
    input results-small Your Monthly Income Target
    header-marker Add Up What You Have    
    header-orange Your Current Monthly Income     
    text In the white spaces, below, enter the monthly income you get from Social Security, employer pensions, and other monthly sources, such as rents, and how much you have in savings.  
    text We'll then use rule-of-thumb estimates to see what you could get from savings, downsizing, and adopting a less costly lifestyle. 
    text For better estimates, and estimates of what you could get from a reverse mortgage or means-tested benefits, use the tools in the TOOLKIT below.  Then enter these estimates in ADVANCED, below, to update your plan. 
    gap     
    header-small Monthly Income 
    header-column Income You Get Each Month  You  Spouse Total
    input results-small Social Security 
    input results-small Employer Pensions
    input results-small Rents, etc.  
    input results-small Income from Savings:  
    text If you have $100,000 in savings invested in stocks and bonds, a rule-of-thumb says you can draw out $330 a month ($4,000 each year) with little risk you'll run out of money.  So enter how much you have to see what you might get.
    input results-small Your Savings 
    input results-small Your Income from Savings
    gap     
    input results-small YOUR CURRENT MONTHLY EXPENSES
    input results-small YOUR CURRENT MONTHLY INCOME
    input results-small
    header-marker If You Have a Shortfall    
    header-orange What Downsizing and a Less Costly Lifestyle Could Do
    header-small What Downsizing Could Do
    text if you downsize from a $250,000 to a $150,000 house, a rule-of-thumb says you could increase your savings and income from savings about $250 a month & reduce your housing expenses about $270 a month.  
    text Replace the figures in the example to see what you might get. 
    header-column   Current House Mortgage New House
    input results-small
    input results-small Increase in Income from Savings
    input results-small Cut in Housing Expenses
    gap     
    header-small What a Less Costly Lifestyle Could Do
    input results-small If You Cut Spending 
    that's
    gap     
    header-small If You Downsize & Adopt a Less Costly Lifestyle
    text
    input results-small NEW MONTHLY EXPENSES
    input results-small NEW MONTHLY INCOME
    input results-small
    header-marker If You Still Have a Shortfall
    header-orange Consider a Reverse Mortgage or Government Benefits  
    text-bullets A reverse mortgage is a new and somewhat complicated option that could eliminate mortgage and/or increase your monthly income.  
    text-bullets You might be entitled to government benefits if your income is low and you have limited savings.  
    text The TOOLKIT, below, has information about these options.  You can then enter what they'll do in ADVANCED, to add these options to your Retirement Income Plan. 
    header-marker Retirement Income Plan  
    header-orange Monthly Expenses
    input results-small Your Original Monthly Income Target
    input results-small Less Cuts in Spending From 
    input results-small   Downsizing
    input results-small   Adopting a Less Expensive Lifestyle
    input results-small   Reverse Mortgage (eliminate current mortgage)
    input results-small   Government Benefits 
    total YOUR MONTHLY INCOME TARGET
    header-orange Your Monthly Income    
    input results-small Monthly Income from Social Security, Pensions, Rents, etc.
    input results-small Plus Income From
    input results-small   Savings
    input results-small   Savings Added From Downsizing
    input results-small   Reverse Mortgage 
    input results-small   Means-Tested Benefits
    total YOUR MONTHLY INCOME
    total
    header-marker Advanced    
    header-orange Enter Better Estimates     
    text Use the tools in TOOLKIT & enter the better estimates you get to update Your Retirement Income Plan. 
    input results-small Income from Savings 
    header-column Change in Expenses & Income From Expenses Income
    input results-small Downsizing
    input results-small Less Costly Lifestyle 
    input results-small Reverse Mortgage 
    input results-small Government Benefits  
    gap     
    header-orange Will Your Survivor Have Enough?    
    header-small Survivors Generally Need Less, But Also Generally Have Less 
    text-bullets One person needs less income than two.  We assume your survivor will need 70% of what you need as a couple.  As survivors need less, we also assume they get 70% of any government benefits you get as a couple.  
    text-bullets Survivors get one Social Security benefit, not two.  But if you're married, the survivor can get the higher of your two Social Security benefits. 
    input results-small So tell us your marital status
    text-bullets If married, your survivor generally gets half the deceased spouse's employer pension.  That's what we assume.
    text-bullets Most employer pensions, however, are not increased in line with prices.   So we assume they will buy only 60% of what they do today when the first spouse (or partner) dies.  We assume the same for income from a reverse mortgage. 
    text-bullets Caring for the final illness typically reduces the couple's savings.  We assume the final illness will reduce your savings, including savings from downsizing, 20%. 
    gap     
    header-small Will Your Survivor Have Enough?    
    header-column Who Survives:  You 
    input results-small MONTHLY INCOME
    input results-small   Social Security 
    input results-small   Employer Pensions 
    input results-small   Rents, etc. 
    input results-small   Savings 
    input results-small   Downsizing 
    input results-small   Reverse Mortgage 
    input results-small   Gov't Benefits  
    input results-small MONTHLY INCOME 
    input results-small MONTHLY EXPENSES 
    gap     
    input results-small  
    input results-small 
          
    Powered By SpreadsheetConverter (6.0.4287.4287)

    What About Reserves?

    You Do Need Reserves for Emergencies

    You need reserves, either savings or home equity you could tap, should you need a new roof or furnace or an expensive medical procedure.

    But you probably DON’T need to hold large reserves for expenses down the road.

    Expect to spend more on health care, perhaps a good deal more.  But spending on most everything else typically declines and generally offsets much if not all of the rise in health care spending.

    The big risk is long-term care.  But unless you have a lot of assets – more than enough to provide the income you need – it rarely makes sense to hold reserves to pay the cost.

    • Most people rely on state Medicaid programs for those with “limited means.”  You don’t need large reserves if you’ll to exhaust your “means” should you need to enter a nursing home, usually at the end of life.  Many states also allow your spouse to keep the house + about $100,000. 
    • You can also buy long-term care insurance.  It costs about $200 a month, per person and the premiums could rise in the future.  Such insurance, however, can significantly cut or eliminate your need to hold reserves for long-term care. 

    Toolkit

    Tools You Could Use to Refine Your Plan

    To Downsize. Your house is often your largest asset and largest expense.  To see the income you could get and the expenses you could cut if you downsize, use Figure Out How Moving Changes Your Finances. 

    To Adopt a More Sustainable Lifestyle. To see where your money goes and where you might cut back, use Figure Out How to Make a Budget in 3 Minutes.  To identify specific ways to save money, use Figure Out Where to Cut Spending.

    To Take a Reverse Mortgage. You can get cash, a line of credit, or an income for life, and can stay in your home for the rest of your life.  But there are things you need to know. To learn more about reverse mortgages, please go to: economiccheckup.org/reverse-mortgage.  To see what you might get, use the Government Approved Calculator, from the National Reverse Mortgage Lenders Association.

    To Get Means-Tested Benefits.  Many retirees are eligible for benefits to help pay for medicine, medical care, food, utilities, and other expenses, but don’t apply.  To see if you are eligible, use the National Council on Aging’s Benefits CheckUp.

    Then Get It Done. Put reminders in your calendar. Schedule what’s urgent first. Then what’s big or done quickly. Then what’s not so big or takes time.  And in no time you’ll be DONE.

    Explanations

    Rules-of-Thumb We Use

    Income from Savings

    • The 4% Rule:  In your mid-60s, you can draw out 4% of what you have in savings each year (1/3% each month), rising to keep pace with inflation, with “little” chance of running out of money.  As you can get a higher % when older, or if you use your savings to delay claiming Social Security, we see 4% as reasonably conservative.  

    Income from Downsizing

    • It costs 10% of the value of your current house to downsize: to 1) fix-up your house, 2) sell your house, 3) move your belongings, and 4) fix up & furnish the new house.  After paying these costs, thedifference between the price of your current and new house is added to your savings. 

    Cut in Housing Expenses from Downsizing

    • Housing expenses – taxes, insurance, utilities, and upkeep – are 3.25% of the value of the house.

    Cut in Expenses by Adopting a Less Costly Lifestyle

    • If you downsize, the reduction in your spending after you downsize. 

     

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