News & Insights

TOP TIPS – Tailoring your Saving to your Spending

So, how much will your retirement cost? Unfortunately, there is no easy answer to this question, however, by sitting down with an international financial adviser and asking the following questions you can at least begin to get a rough idea of how much money you will need in retirement:

    • When will you will retire?
    • How long will you and any dependents need your retirement funds to last?
    • How much money do you have in your retirement accounts?
    • How much money do you have in savings?
    • How much do you currently spend each month on essentials?
    • How much do you currently spend each month on non-essentials?
    • How much are you going to set aside for medical and care expenses?

A word on inflation

Inflation will undoubtedly have an impact on how much money you’ll need to be able to fund your retirement. This is because, over time, inflation can reduce your purchasing power. For example, the International Monetary Fund forecasts that U.S. inflation will rise by an annual average of 2.25 percent until 2024.* This means that something you buy today for $100 will cost roughly 102.25 next year, more than $120 in ten years and close to $200 in twenty years – underestimate the effect of inflation at your peril.

And yet, some advisers can overstate the importance of inflation – it is not the be all and end all of your retirement planning because, for a start, you may find that some aspects of your spending will change.

It is likely that your spending will fall?

The EBRI report, “How Do Retirees’ Spending Patterns Change Over Time?”** considers the issue of how an individual’s spending falls as they age and concludes that the older people get the less they spend. For example, average household expenditure by age group is as follows:

    • 50-64 year-olds: $55,000.
    • 65-74 year-olds: $50,000.
    • 70 years-old and older: $39,000.**

Your health care spend will rise

According to a piece of research carried out by HealthView Services in 2019, a 65-year-old couple in good health should plan to spend an average of $387,644 for healthcare costs for the rest of their retirement***.

This figure includes premiums for Medicare Part B, prescription drug coverage and dental insurance. Rather than being alarmed by the size of these figures, it is better to plan in advance and to speak with a professional about ensuring you have the right medical care retirement plan in place to prevent you from being out of pocket.

You will spend less on food (or will you?)

The general consensus is that the older people get, the less they tend to spend on food. However, it is not the same for everyone; you may want to spend your retirement giving dinner parties, sampling haute cuisine and sourcing all your food locally and organically. Whatever the case, you will need to consider the question of your food spend and how it might influence your retirement planning.

Plan for your retirement with Blacktower in the US

You can explore and analyse every retirement planning and retirement spending formula out there and they might give you some idea of how much you need to save, but they cannot act as a useful substitute for personalised retirement financial advice from an expert.

Blacktower (US) LLC has the experience, expertise, qualifications and regulation you require when embarking on one of life’s most important questions: how to successfully plan for your retirement.

Contact us today for more information about how we may be able to help you.

* Accessed 30-03-20

** Accessed 30-03-20

*** Accessed 30-03-20

Other News

NEWS WRAP – INFORM Act Lump-Sum Buyout Proposal

Senator Patty Murray, the ranking minority member on the Senate Health, Education, Labor and Pensions (HELP) Committee, has introduced a bill that would require pension plan sponsors to equip all participant retirement savers with the “critical information” they need regarding lump-sum buyouts.

Murray’s INFORM Act (Information Needed for Financial Options Risk Mitigation) would oblige sponsors to provide members with full information regarding mortality assumptions, interest rates and any additional benefits before proceeding with a lump-sum buyout.

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