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Follow-up to Retirement Planning Post
By JLP | October 7, 2005
The other day I posted ten questions from Terry Savage’s book, The Savage Number
“Asking these questions is key, I agree. My only problem is that I have no idea how to answer them! I suppose some of them are answerable, or at least guessable. And that is better than nothing.“
Here were the original questions:
1. How long will I live?
2. What will inflation do to the value of my savings?
3. How can I save enough?
4. How should I invest the money I’ve saved for retirement?
5. How much will I spend to live in retirement?
6. How much can I withdraw each month without running out of money?
7. What’s the biggest danger to my retirement plans?
8. How can I earn money during retirement?
9. How can I retain control of my financial life?
10. What if I have money leftover when I die?
I agree that some of these questions are difficult to answer. They are even more difficult to answer if you are decades from retiring. However, no matter how far you are from retiring, it is still a great idea to put a retirement plan together and update it periodically (perhaps annually at the same time you are rebalancing your 401(k)) to make sure you are on track.
Although I like Terry’s questions, I think they are out of order. Here’s my version of the questions:
1. How much will I need to live on during retirement?
2. Have I factored in what effects of inflation will have on my retirement income?
3. How much do I currently have saved toward retirement?
4. How should I invest my savings in order to meet my retirement goals? (This is an asset allocation question)
5. Do I plan to work during retirement? If so, what will I do and how much can I realistically earn?
6. What effect will taxes have on my retirement income? Am I or should I be utilizing a Roth IRA?
7. What threatens my retirement plans?
These are just a few that I have come up with so far. I am going to spend some time perfecting these questions and also try to show an example of what a retirement plan could look like.
Topics: Retirement Planning | 1 Comment »
October 12th, 2005 at 2:32 pm
As they say, some planning is better than no planning at all. Answering these questions can involve the use of the crystal ball, but they are important to at least think about because they will impact your results. I liken it to planning for a vacation – you can plan everything to the detail but things never completely go as planned. However, at least you know where you are going.