It’s Your Money: Plan now for a strong, comfortable retirement

“How many jobs have you had in your life?” Tony asked his sister Janis on the old HBO TV series “The Sopranos.”
Janis replied: “Enough to know I never want another one.”
If you feel that way, or think you might someday, you’ve got some planning to do. The goal is financial independence — to get to the point where you can quit working for a paycheck and do what you please, when you please.
That means saving and investing, building up a nest egg, stashing away money into IRA, 401(k) and other accounts. Maybe you’re planning to travel the globe in retirement, or buy a boat, or join a country club.
But the first step to retirement planning is to create a floor of income, to make sure your basic needs are met, like food, housing and health care.
That’s a matter of piecing together paychecks — sources of income in retirement — that will keep coming for as long as you live.
Last month, I discussed Social Security, which provides the foundation of most retirees’ income. It’s probably not enough.
How much more will you need? The first step is to estimate how much you spend now.
Let’s say that when you total up all of your bills and other expenses, you and your spouse spend $100,000 a year. In retirement, you can probably get by on less.
You won’t need to spend as much on clothes, gas and taxes. And, if you can get used to eating dinner at 4:30 in the afternoon like my parents, those weekday senior specials can save you a bundle at restaurants.
Experts say you need 80 percent of your pre-retirement income to pay your expenses in retirement. A more recent study says 60 percent will do. Let’s split the difference and say you want to live on $70,000, but to cover taxes and have some cushion, let’s aim for $80,000.
The two of you paid into Social Security for many years and will receive $3,333 a month. That’s $40,000 of the $80,000 annual income you want. Assuming you have no other pensions, the other $40,000 a year will have to come out of your savings and investments.
How much of your nest egg can you spend per year without worrying about exhausting it? A recent study by advisory firm Gerstein Fisher examined six periods of 35 years and concluded that if you spend 4 percent of your assets a year, your nest egg will last 35 years.
So, if you have assets of $1 million, you should be able to spend 4 percent of those assets, or $40,000 a year, for 35 years without running out of money. That gets you to your retirement goal of $80,000 in pretax income.
For those who expect to have less than $1 million, one possible solution is an annuity. I prefer the ones that provide a guaranteed lifetime income, as opposed to variable annuities that often come with overly optimistic estimates of what might happen.
But interest rates are ultra-low now, so guaranteed contracts don’t pay much. And there are other negatives. You lose some control over your money. Fixed payments buy fewer groceries as inflation rises. But annuities can provide a reliable paycheck that can contribute to a worry-free retirement.
The dream is to have the retirement that you want. But, at least, make sure you can afford the retirement that you need.
– Mark Rosenberg is a financial adviser with Financial West Group in Scotts Valley, a member of FINRA and SIPC. He can be reached at 831-439-9910 or

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