At LBO, we learned early on, that if one does not begin to secure their financial future at an early age, it might often be a fatal mistake. According to a study conducted by the US Department of Commerce, only 5% of all Americans are financially independent at age 65. The study further indicated that 75% of retirees are forced to depend on their families, their friends, and Social Security as their only source of income.
The Retirement Plan Budget
Starting with your current budget, project your expenses at retirement. Remember that certain expenses that you have now such as lunches, clothing and transportation will be eliminated. However, you will incur additional costs for health care, hobbies and vacation travel. Also, be sure to add an inflation factor of 3 to 6%.
Sources Of Income
The four main sources of retirement income are:
- Social Security (based on your average lifetime earnings)
- Employer Pension Plans
- Personal Retirement Accounts
- Personal Investments
Covering The Shortfall
More often then not there is always a deficit of what your retirement expenditures will be over what your retirement income will be. At LBO, we can assist you in calculating that deficit to help ensure that you will be financially prepared in retirement.