Timing Your Retirement With Mary Sterk, Sam McElroy June 18, 2017
The Income Generation With David J. Scranton
I am a fan of what I call top-down analysis. In other words, instead of starting by adding up the expenses that you have in retirement, you take the income you have today and you subtract from it the expenses from it that you won’t have during retirement. That’s a top-down analysis. For example, if you are contributing to your 41k and of course you are not going to do that when you retire then that’s an example of expense that you are going to subtract from your current income. If you are making $100,000 today and you are putting 10% in your 41k well now you know that as retiree you can live off $90,000 and have the same lifestyle. How about taxes. You know taxes are 7.65% when you toss in Medicare and that’s money that you won’t be spending because that’s only tax on earned income when you retire you won’t have to pay that. So now you are down around $82,000 of income living the same lifestyle as $100,000 a day. How about your mortgage? Are you going to pay off your mortgage before you retire? If so when your principal and interest paying a thousand a month then you subtract that maybe now you are down to $70,000. In other words, by the time you subtract all the expenses, you won’t have close to retirement in its hypothetical example you may find that $100,000 you make today is equivalent $70,000 of free tax income as a retiree with no negative impact. Will that be enough for sure to maintain your lifestyle and achieve your goals? Well, there are additional variables for you and your advisor to consider but at least you are starting with a hard number identify and specific goals to measure against because now you can add back to that whatever other goals that you have and how much those might cost. So you are much, much closer to being able to identify confidentially whether or not you have enough to retire now. Let’s welcome back Mary Sterk. Mary you know it’s funny because we talked about retirement before and in the book you have the story about a 50-year-old flight instructor and this flight instructor didn’t think that he or she could retire for a long time and you were able to convince this person that really they were only 2 years away from retiring.
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