Shalin Financial Blog

How Much is Enought For Retirement?

By: Rajesh Jyotishi

When planning for retirement, the two biggest question a financial planner needs to address are are “how much” and “how long”. How much are you going to need and for how long will you need it? The “how much” is a little easier question to address. The “how long” is a little more difficult. With advances in healthcare and people taking better care of themselves, it is quite conceivable that your retirement could last 20, 30, 40 or even 50 years. This makes the “how long” a much more difficult equation to solve.

Let’s assume we want to plan for a retirement without limits. How would we go about doing this? First, we need to determine what kind of lifestyle and retirement you are planning? Are you going to have a modest retirement with basic day to day needs or are you planning on taking expensive vacations several times a year? Are you planning on retiring in India or other countries, or are you planning on retiring here in the U.S?

What is your magic number?

Is there a specific dollar amount you would like to have as income for your retirement? A general rule of thumb is that you will need anywhere from 70% to 100% of your current living expenses in retirement. This is without factoring inflation and social security benefits.

Another formula you can use to determine how much you need to have is take your current annual living expenses and multiply it by 20. If your living expenses are $50,000 a year, that would mean your savings should be ($50,000 x 20) around $1 Million for retirement. Then, if you took out 5% withdrawals of your nest egg each year, you would be able to take a steady stream of income without having to tap much into your principal. This is depending obviously on the rate of return of your savings vehicle. If your retirement assets grew at a higher rate than the 5%, your income would also be able to grow to keep up with inflation, which is a very important requirement. Think about it. If you started your retirement with $50,000 a year without factoring in inflation, 10-20 years from now, that $50,000 would have significant loss in purchasing power.

Don’t Forget Healthcare Expenses.

When planning for retirement, it is important not to forget the healthcare expenses. The costs for long term care including assisted living facilities, nursing homes are continuing to escalate at a higher rate than average inflation. You may want to cover the possibility of this risk with adequate health insurance and long term care insurance. It is estimated, that current long term care expenses can range from $60,000 to $100,000 yr. Without adequate planning for healthcare expenses, your retirement plan can have undesirable outcome. Don’t forget, your retirement plan is not just for you. It may also include your spouse! Since actuarially speaking, women outlive men, poor planning can have even more adverse effect on your loved ones.

Get Expert Assistance When needed.

With so many different choices, If you are not sure on how to get started and how to manage your retirement assets, seek professional guidance. A good financial planner can help!

Is Financial Planning More of a Woman's Problem?

By: Rajesh Jyotishi

 When you think about it, women generally live longer than men based on actuarial science.  According to WebMD, in 2004, avergage life expectancy of women was 5.2 years longer than men.  Women are also the more likely to be caretakers of their husbands in later years should they need long term care or home healthcare.

Yet, when we take a look at most households in our community, and in general, women are often the least involved in the financial planning decisions. Now, does that makes sense? Doesn’t it seem like a good idea for women to be more involved in the family finances and taking part in family financial decisions?

This year as you do your year end financial planning, involve your spouse to create your financial snapshot. If the woman in your house handles your finances, get your man involved. It may not be a bad idea to let your adult children know where you stand, so they can also be better prepared to help you, should you need it.

 Your financial picture is liken to a jig saw puzzle. Even if you are not involved in putting together all the pieces, you should know where all the pieces are so that in the event you are in the position of having to make financial decisions, you can easily access the information you need to make an informed decision.

Here are 4 simple things you can do to get a good handle on your family finances.

 Calculate Your Net Woth: To calculate your net worth, first      list all of your assets, which is everything you own including your bank      accounts, investment accounts, retirement accounts, business assets, home,      personal assets and come up with a total. Next, list all of the assets that you owe which include your mortgage      balance, credit cards, loans, etc. Finally subtract your Liabilities from your assets. This will give you your net worth. By doing this, you will have a good      handle on all of the assets in your household. Review your net worth statement annually      to check your progress.

1. List All of Your Insurance Policies: Locate all your insurance policies      including life, health, auto, home, business, disability, long term care      and review your current benefits. You may want to contact your insurance agent if you are uncertain      of our benefits. It may be a good      idea to also shop around for better rates if you feel you are paying too      much.
2. Review Your Wills: If you have done your estate planning,      review your wills, powers of Attorney, living wills and get an understanding      of how your estate plan is setup. Check your beneficiary elections to make sure it fits with your      intentions. If you haven’t done      your estate planning, don’t procrastinate, get it done! It is an essential part of everyone’s      financial plan.
3. Set Your Goals: How much retirement income will you      need? How much college funding will      you need? How much net worth do you      want? Where and when do you want to      retire? Goal setting can be fun! If      you don’t know where you are going, it is difficult to get there. There are many goal setting programs to      help you accomplish this.

By doing these simple exercises, you will have a firm handle on where you are and where you are heading. If you feel stuck, get some help. Finally, once you have listed and reviewed your finances, keep them in a safe place and tell your spouse and other trusted family members, where they can find these items. If you use a safe deposit box, tell the people involved, where you keep the key and which bank it is with.   May the new day bring you all the health, wealth and happiness you desire!

The Road to College

THE ROAD TO COLLEGE
Why and when should you plan for your child’s higher education?
 by Rajesh Jyotishi

 Remember when a college education was reasonably priced? Those days are gone, and that’s why college planning is so important. Between 2001 and 2006, the average tuition and fees at four-year public colleges and universities increased by 35%. The average tuition for private colleges increased 32% between 1996 and 2006 (according to the College Board).

 How soon is too soon? It is never too soon to begin saving for your child’s education. Many parents start as soon as a child is born. Some parents begin planning before children arrive. If you’re planning on having a family “someday”, start planning now. If you have a child on the way, start now. If you have an infant, toddler, grade-schooler or teenager, start now. Notice a theme here?

How late is too late? If your child is already in high school, you may feel it’s too late to start saving for college. But think again. ANY pre-planning and saving you can do is better than nothing. If you are in a time crunch to save, start thinking of ways to reduce your monthly expenses and increase your cash flow NOW. Then look at some ways to invest what you’ve saved. There are many options beyond a traditional savings account, such as CDs or money market accounts. Do some research, or better yet, enlist the assistance of a financial professional.

What about your retirement? While you may feel that putting off your retirement for a few years is an acceptable trade-off, you should not have to sacrifice your retirement savings to put your children through college. Remember … student loans are available. While you may not want your child to assume such a financial burden, you could always help out with repaying the loan later. Also, by having your child be responsible for at least a portion of their college tuition or expenses, they may experience a greater understanding of and appreciation for the value of their education.

You need a break. A tax break, that is. Many higher education savings vehicles can provide one, such as 529 plans, Coverdell Education Savings Accounts, and certain kinds of tax-exempt bonds. However, as the number of tax-advantaged college savings vehicles have increased, so have the details, rules and “fine print” pertaining to them. In fact, some of these tax breaks could conflict with one another. Unless you’re willing to spend a great deal of time doing research, it may be wise to speak with a financial professional who can help you sort through these options.

Other alternatives to consider … If money is tight, would your child be willing to complete their first two years at a local community college, then move on to their preferred college or university later? The tuition likely to be much less at a state community college, and you could realize additional savings if your child attends school while living at home. If your child does not wish to start college locally, it may be worthwhile to look into the myriad of scholarships, work study programs and off-campus jobs that may be available. The guidance office at most schools will have job information available if you inquire.

The simple fact is - the sooner you plan, the better. If you haven’t begun planning, start now – there is no better time to get the proverbial ball rolling. You may be surprised how a little planning now can make a big difference in the years to come.

These views are those of the author and should not be construed as investment advice. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.