Have you ever asked yourself "Am I saving enough for
retirement?", if so you are not alone. There are many calculators
and software programs readily available online to help project what
your portfolio may be worth at retirement. The problem I see with
many of these tools is that they put far too much emphasis on the
total dollar amount accumulated at retirement. Instead of worrying
about a total amount to save for retirement, investors should start
focusing on how much monthly income their portfolio will be capable
of generating in retirement.
A recent study by the Employee Benefit Research Institute found
that more than 40% of workers said they determined their retirement
savings needs by guessing and more than one-fourth said they were
not at all confident they would have enough money for retirement.
Whether your portfolio is worth $200,000 or $2 million, deciding
how much more you need to save, when to retire, and how much you
should spend during retirement is not easy. But these questions are
much easier if you have a good estimate of how much monthly income
your portfolio will be able to produce come retirement.
Here at Snider Advisors we have always focused on monthly income
when evaluating our portfolios as we feel this is the true measure
of whether your retirement portfolio is capable of meeting your
objectives. Others in the industry are finally beginning to
recognize the benefits of focusing on income as well, a bill
introduced in Congress in February would require 401(k) plans to
give participants an estimate of the monthly income they can expect
in retirement each year. An assortment of academic research
suggests that this information would help investors make smarter
By changing the language you use in reference to your
investments and switching from the capital appreciation to the cash
flow mindset, the transition to living off of your portfolio will
become easier to conceptualize.
To help you start thinking in cash flow terms we have created
application to help you determine how much income your portfolio is
currently capable of producing and whether or not it will be able
to meet your income needs in retirement based on your current
spending and savings habits. This tool is just a starting point,
but once you begin to think in terms of projected monthly income,
you are at least speaking the right language for retirement
security. The next step is to find an
that helps you maximize your portfolios income potential.
The intent of this article is to help expand your financial
education. Although the information included may be relevant to
your particular situation, it is not meant to be personalized
advice. When it comes to investing, insurance and financial
planning, it is important to speak to a professional and get advice
that is tailored to your unique, individual situation. All
investments involve risk including possible loss of principal.
Investment objectives, risks and other information are contained in
the Snider Investment Method Owner's Manual; read and consider them
carefully before investing. More information can be found on our
website or by calling 1-888-6SNIDER. Past performance is not
indicative of future results.