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I have about 245,000 in my 401k....am I on target for my retirement ? I'l be 53 next week.....?

Jun 22, 2012 by Brian from Gambrills, MD in  |  Flag
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3 votes

Hi Brian, Congratulations on building this nest egg...keep deferring as much as possible! You're ahead of the average amount of 401(k) assets amassed for someone your age. To answer your question - a financial planner is better equipped to tell you if you're on target for retirement (or not) by looking at your planned retirement age, some projected rates of return (depending upon various asset allocation changes in all of your investments), the cost of your various pre-retirement and other retirement goals, projected future medical expenses, etc. I recommend you seek the advice of a fee-only advisor to answer these and other questions you may not even realize you have (do you have enough life and disability insurance? Do you have long-term care?). Good luck.

Comment   |  Flag   |  Jun 22, 2012 from Berkeley Heights, NJ

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3 votes

Hi Brian; You're smart to begin addressing this question now. Too many take it for granted and wait until it's too late. First, I agree completely with Eve. Now is the time to get help. But, to get you started, I have two answers for you:

  1. The consultant's answer: It depends: It depends on how much your saving, how long you intend to work, what your lifestyle requirements will be when you retire... you get the idea. No one can know the answer without knowing the other inputs.

  2. The answer based on experience and the numbers: If you plan to retire at the 'traditional' age of 65, I doubt you're on track. That's only 12 years out and, let's face it, you aren't going to have your entire life savings invested 100% in stocks - that would be far too risky. Even if the blended return on your portfolio averaged 6%, and that is an 'if', and you were adding $10,000 per year, that would get you to around $660,000. That sounds pretty good until you realize it probably represents about $26,000 in annual income (4% withdrawal rate to guard against running out of money) and - here's the worst part - that's in TODAY's dollars. At a 3% inflation rate, that would be like retiring on $18,500 today. Even adding Social Security, that may not be where you want to be.

But wait, as they say in the tv commercials, you may have a pension, you may have an inheritance, you may have a second income or part-time work in retirement! There are ways of getting from where you are to where you want to be.

Eve is right: Find a fee only CFP® professional who is also a Registered Investment Advisor, held to a fiduciary standard. You might think it's expensive; but I can think of mistakes that are far worse.

Good luck!

Comment   |  Flag   |  Jun 22, 2012 from Moorpark, CA

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Brian -- Yours is a good question that is impossible to answer without a lot more info. The best approach is to develop an estimate of your resources and spending. Resources includes (401k, other accounts, social security benefits, future income) and compare it against your liabilities (mortgage, essential living, desired living, taxes, etc.) current and future. If the two numbers are equal, you are ok. If liabilities are greater (less), nope (yes). If this personal "balance sheet" approach has any appeal, I suggest the book "Risk Less and Prosper: Your Guide to Safer Investing" from your library or bookstore. You can figure it out by yourself but it is hard but this book makes it easier. By reading this book, you will be much better prepared to select a financial advisor. Hope this helps.
p.s. -- remember that your 401k will be taxed as it is withdrawn so it is less than you may think.

1 Comment   |  Flag   |  Jun 22, 2012 from Ridgefield, CT
Eve L. Kaplan, CFP®

Yes - that's a good point - the tax effect on your 401(k) easily can reduce it by 1/4, 1/3 or more.

Flag |  Jun 22, 2012 near Berkeley Heights, NJ

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It all depends. It's not how much wealth you have as it is about how you spend it. So a lot depends on your projected retirement lifestyle, where you will live and what kinds of expenses you will have. A big part of that will be what kind of medical insurance coverage you have. Another question will be what kinds of income sources will you have in retirement: a pension (some jobs still offer them along with a 401k), Social Security, part-time work.

You should consider that when it comes to claiming your Social Security benefits there are multiple strategies that can be employed to increase your annual benefits by hundreds or thousands of dollars each year. This can add up to real money over your lifetime. (This is better described on the SSA website or Social Security Timing software). You can do an internet search or access these through resource links on my company website.

You may also need to gauge your retirement readiness by doing a retirement income planning exercise available for free through www.FreeRetirementReport.com (promo code CVW).

Comment   |  Flag   |  Jun 27, 2012 from Amesbury, MA

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Brian, Your question needs more detailes before a quality answer can be presented. That being said, you should consider some of the following in order to formulate an answer. 1] When will you retire? 2] How much income will you need in retirement and for how long? 3] What type of goals will you have during your retirement years? 4] What level of probability are you comfortable with in achieving your retirement goals? Hope some of this helps in starting the thought process. Ask your advisor to help you with some of this thinking and you should start to get a pretty clear picture of weather you are on track. Best of luck! Dan

Comment   |  Flag   |  Jun 22, 2012 from Asbury Park, NJ

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