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SENIOR ADVOCATE

By Liza Horvath

 

Better Save More for Retirement

 

Are you too fit to retire? This may seem like an odd question – but for many it is an important one. Merv Sutton of Carmel retired and now spends his days traveling with wife, Nancy, visiting grandchildren or hunting with friends. “I never realized that in retirement you spend way more money than you did when you were working,” Sutton says and, while Sutton is not worried about his personal finances, his statement bears consideration.

 

Historically, financial advisors have told us that while we are working we need to be saving for retirement and the consensus has been that you will need an annual income of about 70 percent of your last working year’s income to live comfortably throughout retirement. This means that if in your last year of work your income is $100,000, you should plan to have an income or assets enough to spend $70,000 a year in your golden years.

 

This 70 percent number may have worked when people retired at age 65, lived until 80 and spent most of their retirement years in a rocker on the front porch but, as we have come to expect, the Boomers are changing the game. Boomers are now traditionally retiring later than age 65 but still most are fit and healthy. Upon retirement, Boomers are able to spend time pursuing the many things they did not have time for when they worked and most of these pursuits cost money. Couple a more expensive lifestyle with longer life expectancies and the 70 percent income number is no longer going to work.

 

Today’s retirees want to travel more, eat better – think organic vegetables and free range chicken - and enjoy expensive recreational activities like kite-boarding, surfing and golf. Also, a record high number of seniors report that they are helping grandchildren with educational expenses or helping children recover from the recent recession.

 

Medical procedures like hip-replacement and shoulder surgery – most likely due to the active sports that Boomers participated in while young - are at an all-time high. Many of these procedures are covered by Medicare, but some rehab, homecare assistance and transportation costs can be out of pocket. Additionally, Boomers are interested in preventative medicine so more money is spent on cancer screening, ultrasounds and now, with the dawn of genetic mapping, Boomers are seeking to determine if they are prone to certain medical maladies or they want to know exactly what medication will be best for them should they become ill.

 

So, if 70 percent is not the right number then what is? According to Certified Financial Planner George Chobany, “You need at least 100 percent of your last year’s earned income for every year you are retired – especially if you plan to retire in California. We have high gas prices, dining out is costly and our taxes are most likely only going to continue to increase.” Chobany further states, “Boomers don’t want to hear “no” – they are active, smart and aggressive. Most feel that they have worked hard and they want to have an active and exciting retirement.”  

 

Higher costs and longer lives equal more needed dollars for retirement so, while it may seem daunting, strive to make progress toward your retirement number every year, stay as fit and healthy as possible and your retirement years should be golden.

 

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com

 


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