The past few years have been harsh ones for retirees as a
volatile stock market and economic uncertainty have made retirement planning
especially challenging. That said, it is important not to neglect one of the
most important tasks in successful preparation for your later years: conducting
a retirement needs calculation to estimate how much money you will need for
ongoing expenses.

Unfortunately, more than one-third of retirees with financial
advisors had not estimated how much money they would need to maintain their
current standard of living throughout their retirement.¹ This is a
glaring omission because research has shown that those who have done a
retirement needs calculation are likely to be more confident that they are
accumulating enough assets.² They also are likely to have higher
savings goals, which may be an indication that completing the needs calculation
has given them a realistic assessment of how much they need to save.

Help From a Financial Advisor

If you are uncertain about how to conduct a needs calculation,
it may be helpful to consult a financial advisor. More than 6 in 10 (61%) of
retirees who participated in a recent survey had a relationship with a personal
financial advisor. Retirees with financial advisors were more likely to engage
in some aspect of financial planning and were somewhat more willing to take a
degree of investment risk, but not to the point of aggressively managing
household assets.

If a financial advisor is not available to you, an online
calculator or a worksheet can help you estimate how much you will need.
Surprisingly, when workers polled by the Employee Benefit Research Institute
were asked how they went about conducting a needs calculation, 42% said they
guessed and 9% read or heard how much was needed.² These offhand
estimates may not be as reliable as a financial advisor or a tool that takes
into consideration your current level of retirement assets, your estimated
expenses, your time horizon, and other variables.

There's no question that the past few years have heightened
feelings of uncertainty, but try not to let these feelings cloud your planning.
Doing the math of retirement is a wise investment of time and effort in your
financial future.

Source/Disclaimer:

¹ Sources: International Foundation for Retirement
Education; LIMRA; the Society of Actuaries, "The Financial Recovery for
Retirees Continues: The Impact of the 2008-2011 Financial Crisis," 2011.

²Source: Employee Benefit Research Institute, Issue
Brief, March 2011.

###

December 2011 — This column is provided through the Financial
Planning Association, the membership organization for the financial planning
community, and is brought to you by Ronald J VanSurksum, CFP®, a local member
of FPA.

Required Attribution

Because of the possibility of human or mechanical error by
McGraw-Hill Financial Communications or its sources, neither McGraw-Hill
Financial Communications nor its sources guarantees the accuracy, adequacy,
completeness or availability of any information and is not responsible for any
errors or omissions or for the results obtained from the use of such
information. In no event shall McGraw-Hill Financial Communications be liable
for any indirect, special or consequential damages in connection with
subscriber's or others' use of the content.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

To view newsletter go to: http://www.CFP.net/enewsletter/December2011.html

December 2011 Edition
In This Issue

• The More Things Change, the More They Should Stay the Same
• Tips to Help You Deal With Challenging Times
• You Should Meet With at Least Three Advisers Before Selecting One
• Tap Into Your Child's Excitement to Make Investing More Appealing to Them

and more...........    Please click link at the top of the page to view newsletter

As retirees shift their focus from accumulating assets to creating an ongoing stream of
income, many are not prepared to start planning from a new vantage point. This
lack of perspective may explain why, according to a recent survey, many
retirees anticipate making annual withdrawals that are too large, and run the
risk of outliving their assets.

How Much to Withdraw

Historically, financial advisors have recommended that retirees limit annual withdrawals to a
maximum of 3% to 5% of assets, adjusted for inflation, to limit the chances of
running out of money. Yet a recent survey indicated the following:¹

• Nearly one-third of respondents believed they could withdraw between 7% and 10%
  annually.
• Just over 10% anticipated that they could withdraw between 11% and 15%.

Many respondents also underestimated the percentage of their preretirement income
they would need annually to pay for living expenses. Only 45% of respondents
understood that retirees typically need between 80% and 90% of preretirement
income to maintain their preretirement standard of living.

Factors Affecting Retirement Income

If your retirement assets are running short, a variety of
factors are likely to influence how much you will need during your later years:

• Your retirement age. Collecting Social
  Security at your earliest opportunity, which for most people is age 62, results
  in a permanent reduction of between 20% and 30% in the amount of your monthly
  benefit.
• Medical expenses. It's no secret that
  Medicare is experiencing financial stress and employer-sponsored health care
  plans for retirees are less generous than they formerly were. The Employee
  Benefit Research Institute has estimated that a couple retiring at age 65 with
  median drug expenses would need to accumulate $271,000 to ensure a 90%
  probability that they will have enough to pay for medical care. This amount
  does not include the cost of long-term care, which would make the estimate even
  higher.
• Housing. A large mortgage or other
  indebtedness limits financial flexibility. If you live in spacious quarters,
  consider how you will be able to finance mortgage payments, taxes, maintenance,
  utilities, condo fees, and other expenses.
• Discretionary costs of living. It can
  be difficult to control expenses for necessities such as utilities and health
  care. But variable costs, such as restaurant meals and vacations, are a
  different matter. Review how you may be able to trim variable costs before you
  retire without leading a Spartan lifestyle. Getting used to a more efficient
  mode of living may help you in your transition to retirement.

Source/Disclaimer:

¹ Source: MetLife, Met Life Mature Market Survey,
October 2011.

###

November 2011 — This column is provided through the Financial
Planning Association, the membership organization for the financial planning
community, and is brought to you by Ronald J VanSurksum, CFP® , a local member
of FPA.

Required Attribution

Because of the possibility of human or mechanical error by
McGraw-Hill Financial Communications or its sources, neither McGraw-Hill
Financial Communications nor its sources guarantees the accuracy, adequacy,
completeness or availability of any information and is not responsible for any
errors or omissions or for the results obtained from the use of such
information. In no event shall McGraw-Hill Financial Communications be liable
for any indirect, special or consequential damages in connection with
subscriber's or others' use of the content.

© 2011 McGraw-Hill
Financial Communications. All rights reserved.