With the oldest baby-boomers now reaching the age of 66 years the need to understand the financial realities related to retirement is becoming more relevant with every passing year.  Knowing how much is enough for life-long income may well be the most important life calculation for today’s baby boomers and seniors.  Do you have a clear understanding of your retirement readiness?

There are key numbers that must be reviewed to begin understanding your long-term probability of success: retirement income sources (like Canada Pension and Old Age security); retirement expenses (that will fluctuate based on changing needs and inflation); and your assets (financial ability to fund an income shortfall).

While it is quite simple to calculate the changes of pension incomes over time, it is far more difficult to calculate how lifestyle needs and expenses may change over a 20 or 30 years period.  In addition, your investment assets may also fluctuation and deplete.

How can you manage these variables to give you the clarity and confidence that you need?  The solution begins by knowing your expected retirement income shortfall (if any) and then the sustainable withdrawal rate from your investment resources. 

However, this does not fully solve your problem because these numbers can also vary considerably; you only need to use history as a guide to see that different 30 year periods of time had very different economic and financial experiences.

What can be done to adjust for the variability of your expected expenses, income shortfall, and the sustainable withdrawal rate from your investments?  Averaging the variability of outcomes is one option commonly used by financial planners, but this method has only a 50% chance of success; not good odds when your retirement is on the line.  Therefore it is critical that your analysis is adjusted to successfully handle adversity throughout your retirement years. 

The goal is to ensure that you have a high probability of achieving inflation adjusted income for the rest of your life.  It also enables you to make informed decisions and to live the lifestyle that you want and deserve with the peace of mind that you will have long term financial security. 

EVENT NOTIFICATION:  I will be giving a presentation on advanced retirement analysis and planning on November 14^th at 5:30PM, sponsored and hosted by Crofton Manor Retirement Residence at their beautiful location: 2803 West 41^st Avenue, Vancouver.  To learn more and register watch our 1-minute video.  Alternatively, contact Crofton Manor directly at 604-263-0921.  Space is limited, register today!