Regardless of your age, you should be thinking about retirement planning. In fact, you should be doing much more than just thinking about it – you should be incorporating it into your estate plan. Why should retirement planning be part of your estate plan? Because if you fail to plan properly for retirement, you will not have much, if any, estate left to pass down to family and loved ones. The best way to ensure that retirement planning is properly incorporated into your estate plan is to work closely with an experienced Missouri estate planning attorney; however, it may also help to learn some retirement planning basics as well.
Why Do You Need to Start Retirement Planning Now?
Once upon a time, the average worker could count on a pension from the company they spent their lifetime working for along with a decent Social Security retirement check each month during their “Golden Years.” Sadly, the concept of lifetime employment has all but disappeared from the American economy, taking with it the pensions on which people used to rely. Moreover, with the future of the Social Security program uncertain, today’s workers cannot count on future income from the program. Moreover, the income you do receive (assuming the program is still alive) will not go as far as it once did toward supporting you during your retirement years. For 2016, the maximum Social Security retirement benefit is just over $2,600 per month — and only people who had maximum earnings prior to retiring qualify for that amount. The average monthly benefit is only around $1,300 per month. If you operate on the assumption that you will need between 70-80 percent of your current monthly income during your retirement years, it becomes clear that relying on Social Security retirement benefits will not suffice, hence the need to focus on retirement planning early on in life.
How Much Do You Need for Your Retirement?
This is where it really gets confusing. Experts do not always agree with each other about how best to calculate what you will need for your retirement. A few basic theories, however, seem to be generally accepted, including:
- If you plan to remain in the same city and home, you will be able to live on about 80 percent of what you live one now when you are retired. If, for example, your monthly expenses now are $6,000, you would need $4,800 a month if you were retired.
- Take what you need yearly and multiple by 25, assuming the average person lives 25 years after retirement.
- Assume a cost of living increase of 3-5 percent each year.
- Factor in an emergency fund equal to at least three months on living expenses.
How Does Retirement Planning Fit into Your Estate Plan?
Retirement planning gets even trickier when you try and combine it with estate planning; however, failing to consider them together is a sure way to potentially see both plans fail. Because of the natural overlap between these plans, it is best to include everything in one “master” plan. A comprehensive estate plan does just that. Although the primary focus of your estate plan may be the distribution of estate assets after your death, a well thought out estate plan should also include current financial planning as well as retirement planning. After all, if you fail to protect and grow your assets while you are here, there will not be any assets left to distribute when you are gone. Moreover, by creating a comprehensive plan you can often accomplish several goals at one time. For instance, you might be concerned about the high cost of long-term care and your inability to cover those costs unless you can qualify for Medicaid. To do that, you must remove valuable assets from your estate now so they do not cause you to be found ineligible for benefits. A Medicaid trust might be the answer. That same trust may be able to provide you income during your retirement years.
The key to a successful retirement plan is to start early and plan for all possible contingencies. Moreover, your retirement plan needs to be incorporated into, not be separate from, your overall estate plan in order to create a comprehensive plan.
For additional information, please join us for one of our upcoming free seminars. If you have additional questions or concerns about retirement planning in Missouri, contact the experienced Missouri estate planning attorneys at Amen, Gantner & Capriano, Your Estate Matters, LLC by calling (314) 966-8077 to schedule an appointment.