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What is a Good Monthly Retirement Income?

Planning Matters Radio / Peter Richon
The Truth Network Radio
January 18, 2025 9:00 am

What is a Good Monthly Retirement Income?

Planning Matters Radio / Peter Richon

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January 18, 2025 9:00 am

According to the @Bureau of Labor Statistics, the average annual expenses for people 65 plus in 2021 was about $52,141.00, which works out to about $4,345 a month.

But as Peter with Richon Planning explains to Erin Kennedy, no two people are alike, so figuring out how much money YOU will need depends on your lifestyle and your unique retirement goals. To determine what you'll need for a comfortable, monthly retirement income, first walk through these prompts:

1. Picture your ideal retirement 

2. Create a spending plan

3. Consider common risk factors

4. Build a robust nest egg

5. Create a legacy plan

 nb If you'd like to speak with Peter to build a personalized retirement plan that addresses your unique goals, please give him a call at (919) 300 - 5886 or visit www.RichonPlanning.com

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Peter, very good to see you and welcome back to everyone.

We have a really great question today. What is a good monthly retirement income? Let's start with some data. According to the Bureau of Labor Statistics, the average annual expenses for people 65 plus is $52,000.

That comes out to $4,345 a month. But of course, no two people are alike. Your lifestyle and your unique retirement goals.

So let's walk through some prompts to figure that out. The first step would be to picture picture your ideal retirement and be as specific as possible. Yeah, averages aren't reliable. So that number of 52,000 that's not any specific person's income need. There's this old story I've heard of the army that they one time tried to order all uniforms in the size of the average soldier.

And it did not work out that those forms ended up fitting anyone. So same here is that average number is not going to be the number that works for any person unless that is your specific number. And a good monthly income is one that is secure, dependable, reliable, whatever the amount is, it could be $3,000 a month, it could be 13, it could be 30, anywhere in between. So being able to spend to support your lifestyle should be secure, reliable, dependable, predictable, and it should be one that keeps you between the ditches, so to speak, that you can have that last throughout the course of your lifetime.

And you could be the best marksman in the world, but if you're not aiming for the right target, then you're not hitting the mark and you're not getting the mission accomplished. So you really need to do some work on defining your need for income. Most of my clients, Aaron, have been lucky or hardworking or blessed, however you want to categorize it. They have been in a category where they have not had to pinch every penny and stretch every dollar and pay as close attention to the budget during their working year. But that same category and description of individual or couple, generally the lifestyle they are accustomed to is that much more expensive and the shift in income when they leave the paycheck behind is that much more significant. And we need to plan and prepare for that because you've got a finite amount of money the day after you retire and an unknown amount of time to make it last. So you need to do some careful planning about how to withdraw and create distribution and income.

Right. And so what does that mean, though, if you're picturing your ideal retirement? Does that mean if I want to retire in Cabo, I need to plan accordingly?

If that is your serious intention, absolutely. I mean, you need to really think about this. And, you know, there is a whole psychological element of retirement that is not spoken about near enough that people who do not have activity or goals or interactions or motivation the day after retirement actually show significantly increased decline. There is a high prevalence of depression in retirement from people who do not have that interaction with with their social group or their peers. They don't have the motivation. They don't have goals. They have nothing to drive them to get up and get out and do something.

And therefore, unfortunately, don't have the the longest lifespan or the highest quality of life. So it's not just the finances that need to get ready for retirement. You really do need to think about what is the day after the month after the year and the years, the decades after I retire. What is that going to look like?

What is going to keep me going and motivated when I don't have the the need or necessity or requirement to show up to work to set my alarm and get up and get out of bed in the morning? Right. OK, step number two, you need to be nice. It would be I would miss a winter, I think. But yes, maybe a second house in Cabo. Yeah, reverse snowboard, snowbird.

You can fly to a wintry area if you can afford a retiring in Cabo, maybe maybe, you know, a ski resort vacation kind of thing. Sounds good. All right. Step number two, you need to know what you are spending now. So track those expenses and then create a spending plan. And again, a lot of people don't pay that close attention to the budget.

So I actually have an exercise that I do on a regular basis, especially as we are getting going to know what target I am aiming for for a client. But continuing to review and update this on an ongoing basis, there are two styles of budget. One I call the line item budget. And this is all of the bills that you have, all of the obligations, the mortgage payment, the car insurance, the the utilities, the the essentials that you must meet.

I call that subsistence. And doing that sometimes does identify areas where you are paying double for something or overpaying for something or have multiple streaming services or or haven't checked on pricing in a while. But generally it does not account for the largest monthly expense that we have, which is lifestyle. And so I encourage my clients to do what I call the look back budget. Let's pull out the last six to 12 months worth of bank statements. You don't necessarily need to come through every place you spent every penny.

And in fact, for this exercise, that's that's not required. All we need to do is look at the front cover of the core root bank account. There's four numbers on the front beginning balance, credits, debits and ending balance. The debits is what you spent in a month. So if you pull out six to 12 months and get a running total, some months will be high, some months will be low. But we can get kind of an average number. And this is not average across the across America.

This is your average. So this is much more reliable of a number of an average looking at that spending and those expenses. And we want to be able to cover at least that on a regular basis, again, with that secure, reliable, dependable income.

All right. Next, you need to consider common risk factors, including inflation, longevity and changes to Social Security. Yeah. So we set the foundation in place, but over time, grounds shift and cracks form in the foundation. And those cracks are from those factors that you just mentioned, inflation, taxation, market volatility, longevity.

There's there's all kinds of factors that need to be identified and addressed. And in the planning process, I'm kind of like Murphy's pessimistic cousin that says everything that Murphy says is actually much too rosy of a potential scenario. In the planning process, we make the bad things happen on paper. We shoot holes in the plan so that the assumptions that we are making about the future are pessimistic. And when things happen that are better than the assumptions.

Fantastic. We're in better shape than we thought we would be. But for the majority of people that I see, Aaron, the assumptions that their plan is based on, that their financial future is based on are pretty rosy. And if those assumptions don't hold true, they are not in as good a financial shape as they expected to be. So I really try to carefully examine that question that and be on the other side of any assumptions that we are making. And by the way, all plans for the future, all projections are based on assumptions and your outcome is only as good as those assumptions are. Next, you say, of course, you need to build a robust nest egg.

I feel like that is almost obvious. But you say also a tax diversified next nest egg. Yeah, you need to have some diversification, not only in the different types of assets, different different types of investments, but also non correlated to your investment account.

Something that is stable, something that is liquid, something that is based for growth and then something that is generating income and not just one thing in any of those categories, diversity and sub diversity within them. And then from a tax standpoint, some money that you have already paid tax on and is available at your discretion. Some money that is already prepaid for all tax and growth.

I love Roth's there. They are one of the most valuable long term assets. And then there is an advantage still to looking at tax deferral. So IRAs along the way during your working career, if we can get a good, good projection of what you're earning now versus what your expenses actually are during your working career.

And we can see that there is a difference. If there's a likelihood of dropping tax brackets in retirement, then by all means, continuing to defer and delay paying taxes on some of your your retirement nest egg may make sense. More and more, I'm seeing that that that is turning a little bit in the tide that people are seeing that, hey, my income actually is within the same bracket as my expenses. And so maybe it makes sense to just go ahead and pay a bill while I'm earning a paycheck with which to pay it rather than try to pay that bill out of my retirement nest egg when I do have a finite amount of money and an unknown amount of time to make it last. But yeah, I think you need diversification. You need non correlated assets. You really need to look at how things are positioned and you need discretionary assets. So another thing that that is important is that, again, not all of your dollars can be dedicated specifically for income and expect that to work out for the decades to come because of those cracks.

So we need some discretionary investment capital that will continue to grow to fill in those cracks over time. Right. OK. And then last, of course, this is a very personal decision you want. You need to decide if you want to leave a legacy. And if you do, you should speak with a financial adviser about how to do that and how to do it in a tax efficient manner. Yeah, not not important to all people, by the way. I mean, there are some people that don't have anyone or any charity or cause or organization that they feel strongly enough about to to leave anything behind for other people, even with kids that they care tremendously about, feel like they have done enough for their kids during their lifetime that they're they're not willing to do without during their own lifetime so that the kids get left with a tremendous amount of wealth. And look, not a selfish notion at all, like you worked hard for your money, you supported kids, you supported causes and charities during your lifetime. It's nobody's obligation to leave things behind. But the reality of it is that if you plan for your own confidence in self-sufficiency, that you are not risking becoming dependent on your children during your lifetime, then more than likely something is going to be left over. And why not do it in the most tax efficient manner possible?

Get your legal documents squared away, make sure your beneficiaries are up to date, and there are certain assets that are better to be left behind than others. And specifically, since the passing of the original SECURE Act, IRAs and 401Ks and retirement accounts are specifically not fantastic generational wealth transfer tools. The government has has reinforced the fact that retirement accounts are for your retirement and not necessarily the most advantageous to be passed in a legacy generationally.

So spend your IRAs or convert them to Roth dollars so at least they are tax free when when they pass. But there are certainly other types of assets that are very advantageous to be left behind. Real estate, life insurance, highly appreciated non-qualified equities. Like there are specific things that can be done to position those kind of assets for maximum tax advantage and efficiency and maximum impact of your legacy. And remember, even if you're not leaving behind dollars, like there's a transference of values that go along with the value, whatever it is. So leave a positive impactful legacy doesn't always mean a huge amount of assets. And these conversations need to be had more often. That's just I like to emphasize that in these conversations. OK, it's not a goal to leave behind a legacy.

Let's not leave behind a mess. How about that? Right, right, right. And I'm glad you said, Peter, that it really does come down to a conversation because we can start with a headline like what is a good monthly retirement income? But there is no one answer.

And if somebody is telling you otherwise, they're not giving you the full picture. Right. So somebody wants to go through all of these prompts with you, Peter, to determine what is best for them, which will be different from their neighbors. What's the best way to reach you? Yeah. Give me a call.

Nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six. You can go online. It looks like rich on planning dot com.

It's my last name. Roshan Roshan planning dot com. You can email me, Peter, at Roshan planning dot com. And I think this is an important topic. We want lasting financial security into and throughout retirement. That's that's the basis of this conversation today and the basis of solid retirement planning. Peter, thanks for your time today. Thank you.

Hey, folks, Peter Roshan here with Roshan planning. So glad that you are enjoying the podcast Planning Matters Radio. You know, one of the tools that we've put out there that people really seem to appreciate and really are finding of value is at nine one nine retired dot com. It is your retirement tax bill calculator. If you've got any kind of retirement account, your tax deferred 401K or IRA, this is the Web site.

This is the resource where you can go. You can plug in your own numbers, your information. You can slide the the tool calculator up and down for your tax rate or your amount of savings and see what your tax bill is likely to be. If you default and defer to the IRS's plan versus what you could potentially bring that tax bill down to. A lot of times it is a very significant savings.

So if you have not yet, go to the Web site nine one nine retired dot com. Run your numbers on the retirement tax bill calculator. This has been planning matters radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment tax or legal advice from an independent professional adviser. Any investment and or investment strategies mentioned involve risk, including the possible loss of principal advisory services offered through Brooke's own capital management. A registered investment adviser, fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation.
Whisper: medium.en / 2025-01-18 10:05:10 / 2025-01-18 10:11:11 / 6

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