ESTIMATING YOUR RETIREMENT INCOME NEEDS You know how important it is to plan for your retirement, but where do you begin? One of your first steps should be to estimate how much income you'll need to fund your retirement. That's not as easy as it sounds, because retirement planning is not an exact science. Your specific needs depend on your goals and many other factors. DOUGLAS STIRLING Stirling Wealth Management USE YOUR CURRENT INCOME AS A STARTING POINT It's common to discuss desired annual retirement income as a percentage of your current income. Depending on whom you're talking to, that percentage could be anywhere from 60% to 90%, or even more. The appeal of this approach lies in its simplicity, the problem with this approach is that it doesn't account for your specific situation. If you intend to travel extensively in retirement, for example, you might easily need 100% (or more) of your current income to get by. It's fine to use a percentage of your current income as a benchmark, but it's worth going through all of your current expenses in detail, and really thinking about how those expenses will change over time as you transition into retirement. PROJECT YOUR RETIREMENT EXPENSES Your annual income during retirement should be enough (or more than enough) to meet your retirement expenses. That's why estimating those expenses is a big piece of the retirement planning puzzle. But you may have a hard time identifying all of your expenses and projecting how much you'll be spending in each area, especially if retirement is still far off. To help you get started, here are some common retirement expenses: Food and clothing Housing: Rent or mortgage payments, homeowners insurance, property upkeep, etc. Utilities: Gas, electric, water, telephone, cable TV Transportation: Car payments, auto insurance, gas, maintenance, etc. Insurance: Medical, dental, life, disability, long-term care Health-care costs not covered by insurance: Deductibles, co-payments, prescription drugs Debts: Personal loans, business loans, credit card payments . Education: Children's or grandchildren's college expenses . Gifts: Charitable and personal Savings and investments: Contributions to IRAS, annuities, etc. Recreation Travel, dining out, hobbies, leisure activities Care for yourself, your parents, or others: Costs for a nursing home, home health aide, etc. Don't forget that the cost of living will go up over time. The average annual rate of inflation over the past 20 years has been approximately 2%.1 And keep in mind that your retirement expenses may change from year to year. To protect against these variables, build a comfortable cushion into your estimates (it's always best to be conservative). Finally, have a financial professional help you with your estimates to make sure they're as accurate and realistic as possible. DECIDE WHEN YOU'LL RETIRE To determine your total retirement needs, you can't just estimate how much annual income you need. You also must estimate how long you'll be retired. Why? The longer your retirement, the more years of income you'll need to fund it. The length of your retirement will depend partly on when you plan to retire. This important decision typically revolves around your personal goals and financial situation. Although it's great to have the flexibility to choose when you'll retire, it's important to remember that retiring at 50 will end up costing you a lot more than retiring at 65. ESTIMATE YOUR LIFE EXPECTANCY The age at which you retire isn't the only factor that determines how long you'll be retired. The other important factor is your lifespan. We all hope to live to an old age, but a longer life means that you'll have even more years of retirement to fund. You may even run the risk of outliving your savings and other income sources. To guard against that risk, you'll need to estimate your life expectancy. You can use government statistics, life insurance tables, or a life expectancy calculator to get a reasonable estimate of how long you'll live. There's no way to predict how long you'll actually live, but with life expectancies on the rise, it's probably best to assume you'll live longer than you expect. IDENTIFY YOUR SOURCES OF RETIREMENT INCOME Once you have an idea of your retirement income needs, your next step is to assess how prepared you are to meet those needs. In other words, what sources of retirement income will be available to you? Your employer may offer a traditional pension that will pay you monthly benefits. In addition, you can likely count on Social Security to provide a portion of your retirement income. Additional sources of retirement income may include a 401(k) or other retirement plan, IRAS, annuities, and other investments. Finally, if you plan to work during retirement, your job earnings will be another source of income. MAKE UP ANY INCOME SHORTFALL If you're lucky, your expected income sources will be more than enough to fund even a lengthy retirement. But what if it looks like you'll come up short? Don't panic - there are probably steps that you can take to bridge the gap. A financial professional can help you figure out the best ways to do that, but here are a few suggestions: . Try to cut current expenses so you'll have more money to save for retirement Shift your assets to investments that have the potential to substantially outpace inflation (keeping the risk in mind Lower your expectations for retirement so you won't need as much money Work part-time during retirement for extra income . Consider delaying your retirement for a few years (or longer) Calculated form Consumer Price Index (CPI-U) dota published by the Bureau of Labor Statistics, January 2022 Prepared by Broodridge Advisor Solutions Copyright 2022. Janney Montgomery Scott LLC is a member of the New York Stock Exchange, Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. For more information about Janney, please see Janney's Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest. In the photo, left to right: Wally Danforth (VP/Wealth Management, Financial Advisor), Douglas W. Stirling (EVP/Wealth Management. Financial Advisor), Joe Kennedy (Financial Advisor) STIRLING WEALTH MANAGEMENT at Janney Montgomery Scott LLC Janney STIRLING WEALTH MANAGEMENT AT JANNEY MONTGOMERY SCOTT LLC 2200 Georgetowne Drive, Suite 400, Sewickley, PA 15143 www.stirlingwealthmanagement.com 1 724 934.2953 in JANNEY MONTGOMERY SCOTT LLC MEMBER: NYSE, FINRA, SIPC REF 887400-1222 adno 268537 ESTIMATING YOUR RETIREMENT INCOME NEEDS You know how important it is to plan for your retirement , but where do you begin ? One of your first steps should be to estimate how much income you'll need to fund your retirement . That's not as easy as it sounds , because retirement planning is not an exact science . Your specific needs depend on your goals and many other factors . DOUGLAS STIRLING Stirling Wealth Management USE YOUR CURRENT INCOME AS A STARTING POINT It's common to discuss desired annual retirement income as a percentage of your current income . Depending on whom you're talking to , that percentage could be anywhere from 60 % to 90 % , or even more . The appeal of this approach lies in its simplicity , the problem with this approach is that it doesn't account for your specific situation . If you intend to travel extensively in retirement , for example , you might easily need 100 % ( or more ) of your current income to get by . It's fine to use a percentage of your current income as a benchmark , but it's worth going through all of your current expenses in detail , and really thinking about how those expenses will change over time as you transition into retirement . PROJECT YOUR RETIREMENT EXPENSES Your annual income during retirement should be enough ( or more than enough ) to meet your retirement expenses . That's why estimating those expenses is a big piece of the retirement planning puzzle . But you may have a hard time identifying all of your expenses and projecting how much you'll be spending in each area , especially if retirement is still far off . To help you get started , here are some common retirement expenses : Food and clothing Housing : Rent or mortgage payments , homeowners insurance , property upkeep , etc. Utilities : Gas , electric , water , telephone , cable TV Transportation : Car payments , auto insurance , gas , maintenance , etc. Insurance : Medical , dental , life , disability , long - term care Health - care costs not covered by insurance : Deductibles , co - payments , prescription drugs Debts : Personal loans , business loans , credit card payments . Education : Children's or grandchildren's college expenses . Gifts : Charitable and personal Savings and investments : Contributions to IRAS , annuities , etc. Recreation Travel , dining out , hobbies , leisure activities Care for yourself , your parents , or others : Costs for a nursing home , home health aide , etc. Don't forget that the cost of living will go up over time . The average annual rate of inflation over the past 20 years has been approximately 2 % .1 And keep in mind that your retirement expenses may change from year to year . To protect against these variables , build a comfortable cushion into your estimates ( it's always best to be conservative ) . Finally , have a financial professional help you with your estimates to make sure they're as accurate and realistic as possible . DECIDE WHEN YOU'LL RETIRE To determine your total retirement needs , you can't just estimate how much annual income you need . You also must estimate how long you'll be retired . Why ? The longer your retirement , the more years of income you'll need to fund it . The length of your retirement will depend partly on when you plan to retire . This important decision typically revolves around your personal goals and financial situation . Although it's great to have the flexibility to choose when you'll retire , it's important to remember that retiring at 50 will end up costing you a lot more than retiring at 65 . ESTIMATE YOUR LIFE EXPECTANCY The age at which you retire isn't the only factor that determines how long you'll be retired . The other important factor is your lifespan . We all hope to live to an old age , but a longer life means that you'll have even more years of retirement to fund . You may even run the risk of outliving your savings and other income sources . To guard against that risk , you'll need to estimate your life expectancy . You can use government statistics , life insurance tables , or a life expectancy calculator to get a reasonable estimate of how long you'll live . There's no way to predict how long you'll actually live , but with life expectancies on the rise , it's probably best to assume you'll live longer than you expect . IDENTIFY YOUR SOURCES OF RETIREMENT INCOME Once you have an idea of your retirement income needs , your next step is to assess how prepared you are to meet those needs . In other words , what sources of retirement income will be available to you ? Your employer may offer a traditional pension that will pay you monthly benefits . In addition , you can likely count on Social Security to provide a portion of your retirement income . Additional sources of retirement income may include a 401 ( k ) or other retirement plan , IRAS , annuities , and other investments . Finally , if you plan to work during retirement , your job earnings will be another source of income . MAKE UP ANY INCOME SHORTFALL If you're lucky , your expected income sources will be more than enough to fund even a lengthy retirement . But what if it looks like you'll come up short ? Don't panic - there are probably steps that you can take to bridge the gap . A financial professional can help you figure out the best ways to do that , but here are a few suggestions : . Try to cut current expenses so you'll have more money to save for retirement Shift your assets to investments that have the potential to substantially outpace inflation ( keeping the risk in mind Lower your expectations for retirement so you won't need as much money Work part - time during retirement for extra income . Consider delaying your retirement for a few years ( or longer ) Calculated form Consumer Price Index ( CPI - U ) dota published by the Bureau of Labor Statistics , January 2022 Prepared by Broodridge Advisor Solutions Copyright 2022 . Janney Montgomery Scott LLC is a member of the New York Stock Exchange , Financial Industry Regulatory Authority and the Securities Investor Protection Corporation . For more information about Janney , please see Janney's Relationship Summary ( Form CRS ) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest . In the photo , left to right : Wally Danforth ( VP / Wealth Management , Financial Advisor ) , Douglas W. Stirling ( EVP / Wealth Management . Financial Advisor ) , Joe Kennedy ( Financial Advisor ) STIRLING WEALTH MANAGEMENT at Janney Montgomery Scott LLC Janney STIRLING WEALTH MANAGEMENT AT JANNEY MONTGOMERY SCOTT LLC 2200 Georgetowne Drive , Suite 400 , Sewickley , PA 15143 www.stirlingwealthmanagement.com 1 724 934.2953 in JANNEY MONTGOMERY SCOTT LLC MEMBER : NYSE , FINRA , SIPC REF 887400-1222 adno 268537