Financially Fit

Posted On January 21, 2020

Your 2020 retirement strategy

by Katie Gantt

It’s safe to say that many of us are concerned about having enough money saved to support ourselves during the impending retirement years. In fact, some surveys have shown that most Americans are more frightened at the prospect of running out of money than they are of dying. While anxiety levels vary, most do at least have some degree of doubt as to whether they are truly prepared for retirement. One thing you can do to help alleviate these fears is find someone who can educate you on the matter. Asking questions, talking through your strategies and goals, and getting some professional advice will go a long way toward easing your mind and securing your future. 

Matthew Fogle is a local financial advisor with Edward Jones. He, his wife, and one-year old son Hunter have lived in the Columbia area for over a decade now. His office is located in West Columbia and he knows the area and his clients well. “I really love working and living in Columbia,” he says. “The best thing about the city is all of the growth that’s happening and of course, the people. Our client relations here at the office are awesome thanks to the fact that South Carolinians have a lot of pride in the area and they’re so friendly! We have some clients that even bring us homemade cakes and other baked goods. We really pride ourselves on having warm business relationships.” 

While the bulk of what Fogle does is help people plan for retirement, he also helps his clients with college savings, life insurance, long term care insurance, CDs and more. He advises his clients to start planning for retirement as early as possible to take advantage of compound interest rates, company’s 401(k) plans, and any opportunity to save. 

When asked what readers should know when considering the basics of retirement planning, Fogle suggests considering these three elements: 

-Withdrawal Rate: Your withdrawal rate is the percentage of your portfolio you use every year during retirement. For example, if you retire with a portfolio worth $1 million and you choose a 4% withdrawal rate, you’ll be taking out $40,000 per year. Your withdrawal rate will depend on several factors – your age at retirement, the size of your portfolio, potential earned income, date at which you start taking Social Security, and so on. Fogle advises that when deciding on a withdrawal rate, you’ll want to reach the “Goldilocks” solution – not too much, not too little, but just the right amount. 

-Reliance Rate: Your reliance rate is essentially the percentage of your overall retirement income that comes from your investment portfolio – your IRA, 401(k) and other accounts. It’s called a reliance rate because you rely on this portfolio to provide income during your retirement. 

–Income Sources: The more sources of lifetime income you have – such as Social Security and a pension from your employer – the less you may be relying on your investment portfolio to cover your retirement goals. However, many private employers have moved away from pensions in favor of 401(k)-type plans, and Social Security will only provide about 40% of your pre-retirement income in retirement, assuming your earned income is average for U.S. workers, according to the Social Security Administration. Consequently, you may want to consider options such as annuities, which can provide lifetime income benefits. 

Fogle advises readers to keep in mind that it will take careful planning to put these three factors together in a way that can help you build enough consistent income to last throughout your retirement – which could easily extend two or three decades. And there is no single formula for everyone. For example, while an annuity could offer lifetime cash flow and help you reduce your reliance on your investment portfolio, it also involves fees and expenses, plus lower liquidity than other sources of income, so it may not be right for everyone. 

While this journey may be as of yet uncharted for you and some of these terms may be foreign, you don’t have to go it alone when taking all your retirement income factors into account. Working with a financial professional, someone who can evaluate your individual situation and then recommend retirement income solutions based on your appropriate reliance rate, withdrawal rate, and potential income sources will go a long way toward your peace of mind and your future financial security.