Retirement Planning

Retirement Planning in El Cajon

Retirement planning in El Cajon is something you’ve been doing for decades. Whether you’re based in Spring Valley or Crest or elsewhere, you spent your entire working life trying to set yourself up for retirement. That makes sense, especially since you might spend as much time in retirement as you do in the labor market. With today’s longer life expectancies, you are wise to pay careful attention to your future.

When it comes to maximizing income for retirement planning in El Cajon, you need a simple, clear strategy that protects your money for the long-term. We design your retirement strategy to solve the two most pressing concerns most people have as they face their upcoming retirement.

Make Sure Your Income in Retirement Meets Your Monthly Needs

First, you need to make sure you have sufficient monthly and yearly income to meet your living needs. You’ll determine what your monthly income needs are based on your standard of living, your basic living costs, your travel requirements, uncovered health expenses, your family’s interests and needs, inflation rates, and other factors.

The 70% Rule estimates that you will need approximately 70-80% of your pre-retirement income to live comfortably in retirement. In East San Diego County, you may need more or less than that.

Make Sure Your Financial Fund Lasts for Your Lifetime

Second, you need to make sure you won’t outlive your financial nest egg, your fund of wealth. For retirees, longevity poses a serious financial risk. You need a lifetime of income, for however long you may live.

How much money will you need?

Do you have enough saved up right now to retire? If not, how much longer do you need to wait before your investments are sufficient?

The Rule of 70 is a formula used to estimate how long it will take for your investment to double in value. It is calculated by dividing 70 by the annual rate of return expected. It assumes a constant annual rate of return. For instance, with a 7% rate of return, one might estimate it would take 10 years for the investment to double. (70 divided by 7 = 10.) With a 5% rate of return, the investment might take 14 years to double. (70 divided by 5 = 14.) Of course, this is a very rough estimate and it does not take into account market volatility. That’s why retirement planning in El Cajon should be responsive to market forces.

Seeking Safety as a Partial Solution

How do you solve these two problems? Some people can rely on government pensions that provide them with the same or similar monthly income they had while working. Others rely on real estate investments such as rental properties to provide the retirement income needed.

For retirement planning in El Cajon, thousands of people rely on their retirement accounts: IRA, Roth IRA, 401(k), 403(b), etc. For those who will depend significantly on these types of retirement accounts for retirement income, they are primarily concerned with market volatility. They have to worry about not just low rates of return but also loss of principal. For retirees, taking losses is not something they can afford.

It must be asked: Where is your nest egg? Where are your assets? The Rule of 100 is a common rule for determining an appropriate amount of exposure in retirement. The rule is to subtract your age from 100 and the answer tells you the percentage of your portfolio to hold in the equities market or stocks.

Thus, a 70-year-old should not keep more than 30% of his or her assets in the stock market. This is because the stock market is too volatile and so it is not considered a safe investment for an individual with a short time horizon.

Obviously, if you have a lower risk tolerance or are more risk averse, then you may want even less exposure to market risk.

Retirement Income Solution

For those whose retirement fund is heavily exposed to the risk of volatility in the stock market, they often look to move some or part of their investments to safety in a Fixed Index Annuity or Fixed Income Annuity. Fixed Index Annuities suitable for retirement offer guarantees that the equity markets do not offer.

In the example above, a 70-year-old whose entire retirement fund is in the stock market might chose to move 70% or more of it into an annuity.

If your goal is to protect your retirement savings and establish a fund of income you can count on for your entire retirement, schedule a time to meet with us. We are dedicated to helping you protect your wealth and your future.