Income Strategies for Retirement
By Saghir Aslam
Irvine, CA
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
Will I have enough money on retirement? It’s a question more and more Americans are asking. Baby boomers in particular wonder if they’ll be able to live comfortably and securely when they leave the workaday world. The good news is that you may be able to retire with confidence and enough assets — if you get organized. That means thinking about what you want retirement to be, reviewing your current investments and benefits, and taking maximum advantage of some investment vehicles designed to provide retirement income. As with so many things, the key is to set clear goals and then pursue them.
“People who are getting ready for retirement are more financially responsible than their counterparts who are not planning for retirement,” says David Karr, a CPA with the accounting firm of David E. Karr and Associates, LLC, in Rockville, Md. “People who spend less than they make and take maximum advantage of the opportunities presented them to save for retirement, these people understand that life is not all about today. If you want a nice retirement life, you need to start planning as early as possible.”
Setting retirement goals is not just about dollars and sense. It’s also about drawing on your values and hopes to create a satisfying life. For some, that may mean continuing to work past age 65, or even starting a new career. Others, of course, may be ready to stop laboring and start relaxing, volunteering, traveling or pursuing a pastime.
Because each individual’s idea of the perfect retirement is different, everybody will have different financial needs. Try to determine what yours will be based on your vision of being retired. Don’t accept the conventional wisdom that says all of us will require 60 to 80% of our income when we stop working. Instead, try to estimate a budget for your specific vision of retirement.
Start by noting what you spend on the basics — food, shelter, clothing, health care and transportation. Include expenses for raising children and the mortgage, if it still needs to be paid off. Also, if you keep working, account for any income you anticipate. Add costs for travel, hobbies, entertaining, donations and a second home, if that’s something you’ve worked toward attaining. Think about what might happen to your taxes and apply that information accordingly. While admittedly imprecise, this estimate should be a fair starting place for creating a retirement budget.
As you look ahead, be sure to consider that, realistically, you may be retired for a long time, and your finances need to reflect that fact.
“If you retire at 65, you have a life expectancy of another 20 to 25 years. That’s a long, long time not to have a regular check coming in,” Karr says.
Once you have a sense of your financial needs, look at the benefits you’re confident you’ll receive. Make sure you know what you’ll get from your employer. This typically will take only a quick visit to the human resources department.
“Make sure you talk to well-informed people. Make sure they know what they’re talking about. Get all the facts. Sometimes there are gross misunderstandings about what you’ll get. You want to focus too on when you get benefits,” Karr says.
Also, review your savings and investments. Then check on your Social Security benefits. Once a year, Social Security sends a statement of these. If you don’t have one, then use the benefit calculators at the Social Security Web site.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
