There is no single number that guarantees an adequate retirement. It depends on a number of factors, some of which can be controlled, others that cannot. Below are some factors to consider in gauging financial needs in retirement.

A. Living costs
A retirement plan requires an estimate of expenses for housing, food, clothing, travel, utilities and other day to day expenses. The best guideline for these expenses are current costs for these items.

Some planners use a percentage of current income level to estimate living expenses in retirement. Estimates of 70% to 80% of pre-retirement income are commonly used to project retirement expenses.

B. Charitable and beneficiary gifting objectives
Wishes to make charitable gifts either in life or upon death should be taken into consideration when calculating financial needs for retirement.

Lifetime charitable gifts will need to be built into a retirement cash flow plan. If an individual wishes to leave money to a charitable organization at death, then that gift will have an effect on what assets may be tapped to provide retirement income.

C. Medical costs
Projecting medical costs in retirement is difficult. As a person ages, medical costs increase. Factors to evaluate include available health insurance, the cost of premiums, prescription drug coverage and overall state of health.

  • Long-term care needs - Expenses for long-term care as an individual ages should be considered as part of any sound retirement plan. A long stay in a nursing home can blow a large hole in an otherwise sound retirement plan. Long-term care insurance is a major expense that should be explored as part of the planning process. State and federal governments have tightened requirements for qualifying for Medicaid coverage of long-term expenses.


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