Do you know which three income sources best cover your expenses in retirement and allow you to lead a comfortable lifestyle once you retire?
In an exclusive GOBankingRates interview with Jaime Catmull, Barbara Ginty, CFP and host of the Future Rich Podcast, shares three income sources that should be in your retirement portfolio. Plus, Ginty shares how to plan around retiring on only Social Security and why younger generations need to set aside more money for retirement.
How much money do you think every American should aim to have in retirement savings and why?
How much you need to have for retirement depends on your expenses and how much you require to live comfortably.
I believe a comfortable retirement is made up of three income sources: usually a combination of Social Security, a pension or pension replacement and your own savings.
Two-thirds — usually your Social Security and pension, which are both fixed income streams — should cover your necessary and regular monthly expenses. The remaining monies, your savings, should cover the remaining non-essential expenses, such as fun stuff like vacations. A rule of thumb: You can use a 4% distribution rate.
What plans should people make if they plan to retire on only Social Security?
If you plan to retire on only Social Security, I would make sure your NET benefit is enough to sustain you. Be sure to figure in both taxes and Medicare costs if those are applicable. It isn’t ideal to only have Social Security so be sure to run the numbers and delay retirement if necessary.
How should someone split retirement investments among options like 401(k) plans, real estate and more?
I would start by maxing out your work plan, and most work plans allow for either or a combination of traditional and Roth dollars.
Once you have maxed out your work plan, then you can investigate other investment options such as real estate or non-qualified investing. I would caution real estate isn’t always passive and investing is.
How should younger generations structure their retirement savings strategy differently than older generations?
Younger generations will need to plan more for retirement as they are less likely to have a pension. Without a pension, you will be responsible for about two-thirds of the income you desire for retirement.
Additionally, Social Security will most likely be collected at a later age, for example age 70, but could possibly be later.
Jaime Catmull contributed to the reporting for this piece.
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