Hi, my name is Mei Carmer, and I am Associate Financial Advisor here at Katterhenry Investment Group of NEST Capital. In case you missed our Finance 101 seminars, you’re in luck. Welcome to episode 8 of our 8 episode video series highlighting the various topics we discussed. In this video we will be discussing retirement. We will go over when to start saving, envisioning your retirement, how much you’ll need, what to do when you retire, and your legacy.
When should you start? You should consider starting to save as early as possible because time in the market is vital to allow your money to compound and allow your investments to grow. You should try saving 10-15% of your paycheck or at least enough to get your employer’s match. You should try to avoid taking premature distributions from these accounts as it will reduce your retirement nest egg, and you’ll get hit with a tax penalty.
To know how much you’ll need for retirement, you need to have an idea of how you want your retirement to look like. How do you see yourself filling your time? Will you get a part-time job, join a club or exercise class? What fun things have you been putting off? Travel? A new hobby? What kind of lifestyle changes do you foresee? Will you become a snowbird? Will you downsize? Permanently move? All of these are questions to consider as it may highlight if you need to save and invest more aggressively.
So how much will you need? First, you need to estimate how much how much you will need a year (or a month and multiply by 12). Then, evaluate what income you expect to have coming in before your investments – like social security, pension, part-time income, rental properties, etc. and subtract that from what you need for the year. Then take that value and either divide by 4% or .04, or multiply the number by 25. This is how much money you will need assuming you withdraw 4% of your investments to live on. It’s important to review your financials and make a plan for how you will save enough for retirement. Are you on track? Could you be saving more? It’s important to start formalizing your plan 5-7 years out from retirement, even 10 years out. This will give you time to make adjustments if you need to, especially if you need to save more or get more aggressive.
Once you do retire, first off congratulations! What a huge milestone. Second, it’s then time to implement your income plan; taking your social security and pension if you have one, then pulling form your investments. If you decide to get a part-time job, you can include that in your income. If you downsize, consider investing the proceeds.
Finally, what legacy will you leave behind? It’s important to make sure you have your will drawn up and beneficiaries listed on your investment accounts since this will make the transfer process easier. You should consider getting a power-of-attorney named in case something happens to you. This is part of estate planning. Finally, you should also think about what you want to leave behind; do you want to leave just whatever is left or do you have a set amount in mind? This can be part of the planning conversation! This has been episode 8 of our 8 episode Finance 101 Video series. Thank you so much for tuning in!
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Katterhenry Investment Group of NEST Capital is a separate entity from WFAFN.