5 Steps to Determine How Much Income You’ll Need in Retirement

Mar 5, 2024 | Retirement Planning

5 Steps to Estimate Retirement Income Needs

USE YOUR CURRENT INCOME AS A STARTING POINT

It’s common to discuss desired annual retirement income as a percentage of your current income. Depending on who you’re talking to, that percentage could be anywhere from 60% to 90%, or even more. The appeal of this approach is its simplicity. It seems fairly common-sense – Your current income sustains your present lifestyle, so taking that income and reducing it by a specific percentage to reflect the fact that there will be certain expenses you’ll no longer be liable for (e.g., payroll taxes) will, theoretically, allow you to sustain your current lifestyle.

The problem? It doesn’t account for your specific situation. For example, if you want to travel extensively in retirement you might easily need 100% (or more) of your current income to get by. It’s fine to use a percentage of your current income as a benchmark, but it’s worth going through all of your current expenses in detail, and really thinking about how those expenses will change over time as you transition into retirement.

PROJECT YOUR RETIREMENT EXPENSES

Your annual income during retirement should be enough (or more than enough) to meet your retirement expenses. That’s why estimating those expenses is a big piece of the retirement planning puzzle. But you may have a hard time identifying all of your expenses and projecting how much you’ll be spending in each area, especially if retirement is still far off. To help you get started, here are some common retirement expenses:

    • Food and clothing
    • Housing: Rent or mortgage payments, property taxes, homeowners insurance, property upkeep and repairs
    • Utilities: Gas, electric, water, telephone, cable TV
    • Transportation: Car payments, auto insurance, gas, maintenance and repairs, public transportation
    • Insurance: Medical, dental, life, disability, long-term care
    • Health-care costs not covered by insurance: Deductibles, co-payments, prescription drugs
    • Taxes: Federal and state income tax, capital gains tax
    • Debts: Personal loans, business loans, credit card payments
    • Education: Children’s or grandchildren’s college expenses
    • Gifts: Charitable and personal
    • Savings and investments: Contributions to IRAs, annuities, and other investment accounts
    • Recreation: Travel, dining out, hobbies, leisure activities
    • Care for yourself, your parents, or others: Costs for a nursing home, home health aide, or other type of assisted living
    • Miscellaneous: Personal grooming, pets, club memberships

Don’t forget that the cost of living will go up over time, and keep in mind that your retirement expenses may change from year to year. For example, you may pay off your home mortgage or your children’s education early in retirement. Other expenses, such as health care and insurance, may increase as you age. To protect against these variables, build a comfortable cushion into your estimates (it’s always best to be conservative). Finally, have a financial professional help you with your estimates to make sure they’re as accurate and realistic as possible.

DECIDE WHEN YOU’LL RETIRE

To determine your total retirement needs, you can’t just estimate how much annual income you need. You also have to estimate how long you’ll be retired. Why? The longer your retirement, the more years of income you’ll need to fund it. The length of your retirement will depend partly on when you plan to retire. This important decision typically revolves around your personal goals and financial situation. For example, you may see yourself retiring at 50 to get the most out of your retirement. Maybe a booming stock market or a generous early retirement package will make that possible. Although it’s great to have the flexibility to choose when you’ll retire, it’s important to remember that retiring at 50 will end up costing you a lot more than retiring at 65.

ESTIMATE YOUR LIFE EXPECTANCY

The age at which you retire isn’t the only factor that determines how long you’ll be retired. The other important factor is your lifespan. We all hope to live to an old age, but a longer life means that you’ll have even more years of retirement to fund. You may even run the risk of outliving your savings and other income sources. To guard against that risk, you’ll need to estimate your life expectancy. You can use government statistics, life insurance tables, or a life expectancy calculator to get a reasonable estimate of how long you’ll live. Experts base these estimates on your age, gender, race, health, lifestyle, occupation, and family history. But remember, these are just estimates. There’s no way to predict how long you’ll actually live, but with life expectancies on the rise, it’s probably best to assume you’ll live longer than you expect.

IDENTIFY YOUR SOURCES OF RETIREMENT INCOME

Once you have an idea of your retirement income needs, your next step is to assess how prepared you are to meet those needs. In other words, what sources of retirement income will be available to you? Your employer may offer a traditional pension that will pay you monthly benefits. In addition, you can likely count on Social Security to provide a portion of your retirement income. To get an estimate of your Social Security benefits, visit the Social Security Administration website (www.ssa.gov). Additional sources of retirement income may include a 401(k) or other retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest, the rate of investment return, and other factors. Finally, if you plan to work during retirement, your job earnings will be another source of income.

NOT A CORNERSTONE CLIENT?

If you have questions about your financial plan please contact us today to schedule a complimentary, no obligation review with one of our advisors. Call 605.357.8553 or email cfsteam@mycfsgroup.com.

M22-12417 Exp 2025.09.27. This information is not intended to be a substitute for specific individualized tax, legal, estate, or investment planning advice as individual situations will vary. Please discuss these matters with the appropriate professional.

Mammograms a Crucial Part of Self-Care

Oct 31, 2023 | We Invest In People

Originally published October 2023

Cornerstone Client Relationship Manager, Stephanie Gerrits, FPQP®, recently talked to staff at Huron Regional Medical Center (HRMC) about their campaign to promote the importance of mammograms to women. A wife and proud mom to three amazing boys, she had her first mammogram at age 40 – a recommendation that all women don’t follow. She believes early detection through regular mammograms is a crucial part of self-care, saying, “I want to be in charge of my health so I can live my life to the fullest and be with my family.”

 

Her willingness to share her experience to benefit this crucial health advocacy campaign is a testament to Stephanie’s belief in the potentially life-saving health screening and her commitment to the community. And it brilliantly reflects Cornerstone’s core value, Invest In People, which drives us to build genuine connections and make a positive impact.

Here’s Stephanie’s Mammogram Story:

Q: Do you have any friends or family that have been affected by breast cancer?
Stephanie: Yes, including a few who have lost their battle. They have all been diagnosed at different stages of life – 20s, 40s, 60s and beyond. And several of them, like myself, have had no close family history of breast cancer.

Q: Why did you get a mammogram?
Stephanie: During my annual physical in 2022, shortly before I turned 40, my doctor recommended that I schedule my first annual mammogram. I wasn’t looking forward to it, so I kept putting it off. However, in June of 2022, I lost a classmate and friend to metastatic breast cancer. It hit me hard because she was a wife, a mother, and 40 years old just like me. Her passing, combined with close relationships with others who’ve battled this disease, pushed me to get an appointment scheduled.

Q: Was it hard to schedule or get an appointment?
Stephanie: For whatever reason, I felt awkward about calling to schedule an appointment. So, I used Huron Regional Medical Center’s online form to make my first mammography appointment (I’ve had two now.) I provided my information, chose appointment dates and times that would work with my schedule, and then they called me with available options that met my criteria. The day of the mammogram was just as easy, I simply checked in with Admissions and went back to the Radiology department. I would guess I didn’t have to wait more than 10 minutes either time I’ve had a mammogram.
Both times I have scheduled a mammogram I’ve been offered an appointment within two weeks of the scheduling phone call. They work with you to find a time that works best for your schedule. I was only gone from work for around 30 minutes for my appointments.

Q: Does having a mammogram hurt?
Stephanie: It isn’t the most comfortable experience, but it isn’t anywhere near as bad as I had imagined. I think that there are a lot of things that women do for the sake of beauty that are far more painful. It is just a little discomfort for the sake of your health once a year.

Q: What would you tell other women about getting a mammogram?

Stephanie: I wholeheartedly recommend getting a mammogram! The brief discomfort of a mammogram is significantly outweighed by the potential benefits of early detection. It can save lives! As moms, we often put everyone else’s needs before our own. But we need to do better, especially when it comes to our health. Making our health a priority gives us the power to be there for our loved ones.

Call HRMC at 605-353-6334 to schedule a mammogram. Or, visit https://www.huronregional.org/services/radiology-imaging/3d-mammography  to learn more or access the online appointment request form.

 

 

 

 

Cornerstone team at Huron’s Annual 1 Mile Walk for Breast Cancer
Alyssa Kirk, Associate Advisor
Lori Mack, First Impressions Director, CFS, Branch Associate, RJFS
Liz Opfer, Personal Assistant, CFS, Branch Associate, RJFS
Stephanie Gerrits, FPQP® Client Relationship Manager

 

Stephanie’s “Why”

Husband Trevor and sons
Logan, Evan, and Dilan

Raymond James is not affiliated with and does not endorse Huron Regional Medical Center. CSP #312962-2 Exp. 10.24.25

Quiz – Market Volatility vs Risk

Jun 23, 2023 | Investing

What’s the Difference Between Market Volatility and Risk? 

While volatility is not the same as risk, the chances of incurring a loss may increase during periods of market volatility. In large part, that’s because investors become anxious about falling share prices and sell when they might be better off holding.

Is there a connection between your risk tolerance and market volatility? Take this brief quiz and find out!

 1. What is market volatility?

a. Asset prices rising over a period of time.

b. Asset prices falling over a period of time.

c. The frequency and size of asset price swings, higher and lower.

d. A measure of how easy it is to buy and sell stock.

 

2. What is risk?

a. The chance of losing some or all of an investment.

b. The chance that actual investment returns will be different from anticipated investment returns.

c. A vulnerability that can be managed through asset allocation and diversification.

d. All of the above.

 

3. How can the effects of stock market volatility be limited?

a. By timing the market

b. By avoiding bonds

c. Through asset allocation and investment diversification

d. By avoiding stocks

 

4. Which famous investor said, “When people are desperately trying to sell, I buy. When people are desperately trying to buy, I sell. It has worked out very well over the years.”

a. Warren Buffett

b. Abby Joseph Cohen

c. Sir John Templeton

d. Abigail Johnson

Answers: 1) c1; 2) d2; 3) c3; 4) c4

 

If you feel overwhelmed and uncertain because of volatile markets, give us a call. You don’t have to go it alone! We can help you make sound decisions during difficult times.

Not a Cornerstone client?

Discover what’s possible when our 140 years of combined team experience and 30 years in business goes to work for you! Call 605-352-9490 or email cfsteam@mycfsgroup.com.

 

 

Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Sources

1 https://www.forbes.com/advisor/investing/what-is-volatility/

2 https://www.investopedia.com/terms/r/risk.asp

3 https://www.investopedia.com/articles/active-trading/121014/protect-retirement-money-market-volatility.asp

4 https://novelinvestor.com/quote-author/john-templeton/

CSP #242150-2 Exp. 10.23.25