- Do you have a 'defined benefit' pension plan?
(a plan provided by your employer on the basis of a actuarially legislated lifetime pension amount paid to you by your employer at at given retirement age).
If you have one more than 80% of your estimated retirement needs will likely be covered.....based on the old 70% rules which these plans considered as well as mortality and investment factors. The key change is in mortality........we are living longer.......which can trigger shortfalls.
If you don't have one you might have ask for help. With no defined benefit plan you face three types of risk that you will have to manage:
- longevity risk
- inflation risk, and
- market risk
Longevity is self-explanatory and is becoming a bigger problem as people live longer.
Inflation can add up surprisingly fast. An annual inflation rate of just 3% can cut the value of your savings in half in just 20 - 24 years. Considering that at age 60 we are currently living 30 years to age 90......the remaining 6 -10 years can be painful....and are under these circumstances.
Market risk is a matter of whether or not you are lucky enough to retire in a bull market.
Other factors to think about include:
- lifestyle
- debt load, and
- inheritance
All of these factors vary widely from person to person.
What it means is that you can't sit down and simply find 'the number' in one sitting.
There is no quick fix. It takes 40 years to reach this stage.
One essential is that you search for and locate a trusted financial advisor.......with the professional practice credentials, experience, commitment and references you need to undrstand the choices available.
The financial planning profession offers state of the art solutions that are comparable to a thorough medical examination which includes an MRI.
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