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Spokane, Washington  Est. May 19, 1883
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Early preparation will ease worries over retirement income

Nancy Hadley

Retirement may seem like a long way off, but as the decades pass time seems to move faster and faster. Planning for retirement can seem overwhelming as we deal with day-to-day life, but it is a worthwhile proposition.

A common mistake made in retirement planning is to rely on Social Security to fully fund your retirement. Social Security was never intended to be the only source of income; it usually will fund about 40 percent of income needs if you wait until full retirement age. A Social Security statement is mailed to individuals annually, or you can request a report. These statements are full of helpful information, so take time to read the statement and run some retirement projections long before you reach retirement age.

Imagine retiring at age 65 with a small nest egg and planning on living on $1,800 a month. Your house is paid for and you live life simply, so it might not be that bad. Then reality kicks in and your furnace goes out, the roof needs repair and your car breaks down. Did you plan for those expenses in your monthly budget? Now let’s add in some health problems. Medicare and supplemental insurance may cover most expenses, but prescription coverage and co-pays add up. By the time age 70 arrives, it looks like you might be returning to the work force or possibly selling your home.

A good place to start is looking at your current income and expenses, then projecting that into your retirement years. If you are just beginning the process you can estimate that it will take about 70 percent of your income to live comfortably in retirement. Those numbers may change over time. Once you settle on your retirement income you can begin to identify income sources such as retirement accounts, investments, real estate or pensions. This process is more comfortable at age 50 than at 65 because you have time to make adjustments to your plan.

Retirement might look very different for you than it has for previous generations. There is a good chance you will be retired for several decades instead of several years. Explore the many retirement options, such as postponing retirement and drawing Social Security at age 70; this solution offers a higher income stream.

Another option is part-time work, consulting work, or creating an income from a hobby. There could be an added benefit to staying mentally and physically active while helping financially. There is a great book called “The New Retirementality,” by Mitch Anthony, that discusses retirement in a new light designed for baby boomers.

Another important consideration is survivor benefits should one’s spouse pass away. Will the remaining spouse have enough income when one Social Security check stops coming? I have seen many cases where one spouse takes charge of the finances with the idea that he will always be there to handle any situation. What happens if he unexpectedly passes away? Survivor income is a whole other topic, but make sure you have a provision in your plan for the reduced income.

Nancy Hadley is a certified financial planner and member of the local Financial Planning Association chapter. Readers can submit questions on financial planning for this column to
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