Today’s Prep:
How can you know just what you need? Eric talks through four different financial scenarios to help you get a better idea of what you need to consider and feel confident in your decisions.
Equipping Points:
Sometimes it can be hard to determine just what we really need. How can you know? Everyone’s situation is different, but there are things you can do to better understand your unique needs and situation. Let’s discuss four areas
How can you know how much income you’ll need in retirement? Eric has an easy answer, and that’s to come in and get a Retirement Readiness Review. The methods they use to figure it out start with figuring out how much you spend and will likely want to spend in retirement. Look at your bank statements for the past year to get an understanding of what you’ll need. But then you’ll want to add in the fun stuff like travel or home improvements.
How do you know how much you need in savings? Typically, you save an emergency fund with six months of expenses during your working years. But during retirement, liquidity is different. You have more access to your accounts. There are still things like taxes and risk to consider, but you have more options when it comes to getting a large sum of money if needed.
When it comes to life insurance, how much do you really need? When you are working and have a young family, you want to make sure you have enough to help with the burden of somebody dying. In retirement, it is a tool that allows you to leave tax-free money to your heirs. You may not need life insurance for the same reasons once you are retired, but you may find it serves your purposes from a tax angle.
What kind of risk do you have and how much should you pay attention to the rules of thumb about it? How much risk you should take depends on how much income that you need. The rule of 100 is one rule people often apply to a risk assessment, but it is not always the one that best suits you. What’s your risk tolerance? Eric goes through risk analytics with his clients to make sure their risk tolerance and their portfolio align. Reach out to a financial advisor to ensure your financial plan accounts for your needs and wants.
Listen to the entire episode or skip ahead using the timestamps below.
1:35 – How much income will I need in retirement?
4:43 – How much do you need in savings?
6:40 – How much life insurance do you need?
8:53 – How much risk should you have?
Today’s Takeaway:
“Instead of looking at how much I have to save to get to retirement, you really want to look at the income you’ll need. Write down what you’ll spend.“
-Eric Peterson
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