According to a recent report by Charles Schwab, most affluent Americans are overconfident about how well prepared they are to fund their retirement needs, especially when it comes to income.
The Schwab report surveyed 1,800 investors with an average income of between $115,000 and $250,000 in investable assets.
The average annual income the survey participants expected to need in retirement was $67,000, just 57% of their current income.
Most financial advisors think that amount is unrealistic. Eighty percent of your current income is the new replacement number planners are using.
Rick Salmeron of Salmeron Financial of Dallas says 100% of your current income is actually where we need to be. That seems high until you look more closely at all the expense numbers.
The killer is medical costs in excess of what Medicare pays.
During retirement a couple can expect to spend $387,000 just on healthcare costs. That kind of number will put a serious dent in most retirement plans.
Gregory Alerte, co-founder and managing director of Gregory & Company, said in a MarketWatch article that couples can easily spend as much in retirement as they did in their work days, even without mortgages. The bar appears to be set high at 80% to 100% of working income, but current expense averages support it.
The ways to increase the amount of money you will have in retirement are well known: work longer (to 70 if your health holds out), save more, carry as little debt as possible into retirement and use all the tax avoidance techniques available to you.
The research shows you will spend more money in retirement than you think. Make the necessary adjustments now.
Editor’s Note: Extra income is hard to come by these days. And yet it’s more important than ever. Fortunately, Wealthy Retirement’s Investment Director has found one of the best opportunities on the market. But time is short. You’ve got to get in before June 12. Click here to learn why…