“Do I have enough?” This question is asked by just about every client with whom I have a conversation. Through calculations with conservative assumptions, we can arrive at a number for every individual or family unit regarding the amount of money they need to have in their retirement account to ensure financial security for the rest of their life.
I find it interesting, after a clear plan is put in place, along with a fully funded retirement account, there still seems to be some lingering doubt in the minds of most people as to whether or not they have enough money. Why does this kind of self-doubt continue to immerge from within?
I believe it comes down to perspective and faith. If you are truly a person of faith, it is easy to believe God is in control. However, it takes a separate act of faith to put this belief into action through the daily circumstances of life. “Now it is required that those who have been given a trust, must prove faithful” I Cor. 4:2 (NIV).
We are charged by God to live out our faith by managing our finances wisely and responsibly. Every asset we have is a gift from God purposed to bring him honor and glory. This line of thinking is in direct contrast to a worldview continually questioning whether or not there is ever enough because the bar of measurement is always changing.
Below are four financial strategies designed to help you accept your steward role and plan properly for your future:
- Budget Your Future Retirement Expenses-
A great place to start is to review your current expenses and clarify your future needs. To identify what you will need financially to sustain your current lifestyle after retirement, calculate future expenses by multiplying current expenses by 75%. For some families the reduced cost is based upon the savings recognized by eliminating or reducing such expenses as a mortgage, continued education, work-related commuting costs, and car payments. When calculating expenses take into account any post retirement activities or travel you may be considering as you will need to add this expense back into the budget.
2. Review How Much Retirement Income You Will Receive-
Income from Social Security, Pension Income, and Annuity Payments are guaranteed income you will most likely receive during retirement. Understand this income is the foundation for your future retirement plan.
- Consider All Investments-
Any current investments you may have outside of your retirement money can also be utilized for income. You may use other investments to make up any shortfall of income from guaranteed income. Consider such things as when your mortgage payments will cease and if downsizing is an ultimate goal. Both of these are instrumental in projecting whether or not you will have enough resources post-retirement.
- Measure the Variables-
Life expectancy, inflation, investment returns and medical costs are the big variables. When planning for individuals, I utilize a life expectancy of 95 years, inflation of 3% and an investment return of 5%. The variables may change depending upon each individual’s situation regarding their family history and risk tolerance. Be conservative as it will protect you from disappointment in the future.
Implementing these strategies will allow you to measure the progression of your financial security. However there is still one more strategy to insure your success in this area. One fall morning I awoke to the sound of rain hitting the roof of my home. I knew instantly it was going to be a cold and wet winter day in Texas. As soon as I hung my legs over the side of the bed a question popped into my head “If I have nothing else in life is God enough?”
I have pondered this question for months with regard to my finances, faith, and future. This process has created a new question we all should ask ourselves- “Is God Enough?” Simply knowing the answer, “yes, God is enough” is not in itself enough. We must go a step further and act upon the truth through faith even when the world tells us differently.
Guy Hatcher – known as The Legacy Guy – has spent his lifetime helping families plan their legacy. His new book, Your Future Reflection: How to Leave a Legacy Beyond Money, is now available at amazon.com. Follow him on twitter @guyhatcher or contact him at www.guyhatcher.com.