As a financial advisor, I am heavily biased, but I think having a financial plan is a phenomenal idea for anybody who hopes to retire in the future. “How much do I need to save?” is a common question I hear, but the better question by far to ask and answer is, “How much do I need to spend?” If you don’t have an idea of your monthly expenses, it is impossible to give a good answer to how much you need to have saved. This doesn’t mean that you must agonize over every receipt like you’re going through an IRS audit, but knowing your fixed monthly expenses and having a reasonable allowance for monthly variable expenses gives you and your advisor something to work with. Every situation is different because multimillionaires may be at risk of spending down their assets, where somebody with a much more modest nest egg may be enough to live comfortably based on spending goals.
Developing and monitoring hundreds of plans over the years has shown me that underestimating your monthly expenses and therefore needing to take large lump sum distributions each year is a recipe for spending down your assets and forcing a tough decision. Changing your plan could involve retiring later, leaving less of an estate, reducing your monthly income, or even going back to work (something most retirees don’t want to entertain). If you want help with the answers to either of the two questions above, and aren’t sure where to start, visit http://www.econwealth.com/contact and request to be contacted. We have resources to help you establish a budget that is a key first step in developing a quality financial plan.
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