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September 24, 2020

Retirement Calculator - When Can I Retire?

Have you saved enough to be able to retire?

Will you run out of money in retirement?

Are you ready to live life on your terms and experience the freedom from work?

Are you ready to throw away your alarm clock?

How about spending time with your grandkids?

Or buying an RV and seeing our country?

If you answered yes to any of these questions then it is likely that you have been thinking about retirement and you are planning to retire within the next few years.

Using a retirement calculator and building a retirement dashboard as you make your way toward retirement can be a great exercise to bring more clarity to your retirement readiness. Let's look at the key metrics we help you track in the retirement budget calculator.

Retirement Countdown:
This may seem obvious but the first thing you are going to want to do is pick a retirement date. By selecting the month, day and year of retirement you can begin to build projections about how much you plan to spend and how much you have saved so that you can try to answer the question of have you saved enough. But it all starts with picking the date you think you would like to retire. In the retirement budget calculator we give you a countdown timer on the dashboard so that you can see your retirement date approaching which will help keep you motivated to create and finalize your retirement plan before you retire.

Income vs Expenses:
Retirement is an exercise in cash-flow. It is about making sure you have enough income to cover your expenses. If you think about it. The reason you have an IRA, 401k or any other retirement account is likely because one day you will want to use those investments to help supplement your spending in retirement. The most important number that you must know is how much do you currently spend? How will your spending change in retirement? What expenses will increase with inflation and what expenses will only last for a few more years and then go away, such as a mortgage payment. It is being able to model your spending that will help inform if you have saved enough to really be ready to retire with confidence.

Net Worth:
Your net worth is important because the assets you have saved will likely be needed to help support your retirement spending. Net worth is simply adding up all of your assets and then subtracting all of your liabilities. But not all of your net worth may be readily available to support your cash-flow. Perhaps you own your house and are debt free. While your house is certainly an asset, it does not create any cash-flow unless you rent out a room, sell it, or take a reverse mortgage. So while it is important to understand your net worth. It is equally important to understand which assets can be used to help create income for your retirement.

Buckets:
Many people today do not have a pension. The only guaranteed income most people have is Social Security. However many people have saved in 401k, IRA, TSP, ROTH, Brokerage & other types of investment and savings accounts. These are the liquid investments that will be used to help you spend in retirement. Many people have their investments in stocks, bonds, mutual funds, ETF's and annuities within these accounts. Now that you are getting ready to retire you need to create a strategy for diversifying your money for cash-flow and you need a strategy to spend your retirement accounts and supplement your income needs. The idea with creating buckets is based on the simple truth that the stock market is volatile. When you begin drawing money out of your investments you will want to create different buckets or time segments based on when you will need the money for living expenses. A bucket approach to diversifying says that money you will need in the short term would be more conservative because this is where you will be tapping into initially to supplement your income. Whereas the money you will need ten years from now can be invested more aggressively because you have time on your side before you will need to tap into them which gives them more time to grow. The buckets in the dashboard helps you to visualize spending your money in three year increments. The first bucket would represent the first three years of retirement and would be more conservative. The fourth bucket is the money that won't be needed for ten or more years and so those investments are where you can afford to take more risk to achieve more growth because you have more time on your side to recover from stock market volatility. Time is the cure to the volatility of the stock market. By using a bucket strategy it can help you avoid drawing money out of accounts that are falling in value.

Future View:
Ultimately, what people really want to know is "can I retire" and "are we going to be OK". Have you saved enough to retire with confidence? Will you run out of money before you run out of time? The purpose of the future view is to allow you to assign a conservative rate of return to your investments and compare the growth of your investments with the inflation adjusted withdrawals that are needed from those investments to cover your expenses. The future view allows you to see if you are going to run out of money prior to your life expectancy.

Retirement Benchmarks:
If you are within a few years of retirement you are going to want to have a strong handle on a few key metrics. They are the Secure Income Score, Safe Withdrawal Rate & Debt to Assets Ratio. By knowing where you are in relation to these benchmarks can help you increase your confidence as you prepare to retire. Here is a link if you would like to learn more about these benchmarks.

Choosing to retire is one of the most important financial decisions you will ever make. Once you retire you are walking away from your wages and earned income which has been the primary driver for your financial security. When you retire you will need to depend on your investments, social security and pensions to help make sure you will have enough income to cover your desired retirement spending.

The fact that you are looking for a retirement calculator means you have probably considered hiring a financial advisor to get a second opinion but you don't know who you can trust and it is hard to find the time to meet with someone. You may have heard that the cost of hiring a financial advisor can range from from $500 - $5,000 just to create a financial plan. That is If you can find a financial advisor who is willing to charge a one time fee for creating a plan. Many financial advisors today charge 1% per year for creating a plan and managing your investments and or they get paid commissions for selling you investment and insurance products. If you have a one million dollar IRA that means you will pay $10,000 per year for a financial advisor if you are paying 1% per year in fees. For many people the cost of hiring a financial advisor is worth it and the benefits significantly outweigh the costs associated with the advisor. But before you sit down with a financial advisor it is highly recommended that you spend time to really understand your own situation thoroughly so that the time spent with a financial adviser is as productive as possible.

The cost for the Retirement Budget Calculator is only $95 per year. You may think this is too expensive and you may want to try and find a "free" retirement calculator. Remember the hold saying "There is no such thing as a free lunch". If the calculator is free, then you are likely the product. A "free" calculator is either an attempt to get you to sign up for the companies investment services and pay investment management fee's or their "free" calculator is supported with ad revenue.

The retirement budget calculator allows you to prepare for one of the most important financial decisions of your life. When you sign up for the calculator you don't just get a calculator to help you crunch the numbers but you are also invited to join a private Facebook group called RBC Nerds where smart people have come together on this retirement journey to share their wisdom and insights. You can do a lot of the number crunching with the help of a good online retirement calculator. Surrounding yourself with smart, like minded people means you don't have to go into retirement alone.

Don't delay, start today Click Here to sign up for the retirement budget calculator.

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