Laguna Niguel, CA

Thursday, August 23, 2012

With the issues such as Medicare and Social Security constantly in the news, now is an excellent time to consider how these issues will affect each of us in our retirement years. While there is no clear indication as to what form Medicare will take for future retirees, it is highly probable that for those under 55 years of age things they will be a changing. For those of us who delude ourselves into believing that we will be prepared for our retirement years, now is the time to realistically evaluate our current status.  According to the 2012 Retirement Confidence Survey conducted by the Employee Benefit Research Institute, 40 percent of those over 55 years of age had less than $25,000. With current yields on certificates of deposit paying around 1.00 percent a year, that $25,000 will produce an annual income of $250. According to the 2010 U.S. Census Bureau, the median annual household income was $49,445.  Social Security will pay a maximum annual benefit of $30,155. This means that investment income plus Social Security will yield an annual income of 61.5 percent of the median household income. Put another way, in retirement there will need to be a 38.5 percent decrease in the amount of money available to support oneself in retirement. How realistic is it to assume that can live on less than two thirds of one's pre-retirement income? Many retirees have, in fact, found that their retirement cost of living was not significantly different than it was before they retired. Furthermore, most people have no idea as to how realistic their retirement plans (if they have any) are.

In order to reduce the probability of not outliving one's retirement assets, many financial advisors believe that one's retirement assets should be 25 times the annual amount one would need to support his/her retirement life style. This means that one would have to amass a retirement portfolio of nearly $1.24 million for those with an annual income of $49,445. If one were to include Social Security benefits, the size of the retirement portfolio would still be $482,250. One should bear in mind that that same survey on retirement confidence s revealed that only 40 percent of those over 55 years of age had more than $100,000 in retirement savings.

The first thing one should do in preparing for retirement is to start saving TODAY, not tomorrow but TODAY. The longer one has to save for retirement the greater the chance of achieving one's goals. Furthermore, one should take advantage of any employer sponsored retirement savings plans, especially those in which one's employer makes contributions. Once having made the commitment to saving for retirement, one should review progress against predefined objectives to ensure that one's retirement savings program is on track.

Saving for retirement does not mean that one should not save for other financial needs such as buying a home or sending one's children to college. The financially prudent household should manage its expenditures to ensure that there will be funds available to cover know as well as unforeseen expenditures.

For further details on saving for retirement and managing one's expenditures refer to Common Sense Prescriptions for Financial Health by Marvin H. Doniger.



About The Author

Marvin H. Doniger has been an avid investor since his early teens. During the course of his lifetime he has developed a philosophy that has served him in his own professional development and in the creation of an investment portfolio for his family's financial needs. His perspectives have been developed from his lifelong study of investing, his actual experiences as a registered representative, an individual investor, as well as from working for large companies in industry and as a management consultant to Fortune 500 companies.

He is the author of A Common Sense Road Map to Uncommon Wealth, which is a treatise on managing careers and finances, A Common Sense Approach to Successful Investing, in which he first introduced stratamentical analysis, a unique approach for identifying long-term investment opportunities, and Common Sense Prescriptions for Financial Health which presents quaestrology, a unique perspective on managing one's finances. He is also a regular guest on the Business Talk Radio Network and other radio shows. His articles have been published in media outlets such as Investor's Digest of Canada and Morningstar.

Mr. Doniger received a Masters in Business Administration from Columbia University Graduate School of Business and a Bachelor of Science Degree in Mechanical Engineering from Tufts University. He has taught undergraduate and graduate level courses in production control, inventory management, information technology and finance at Fitchburg State College and Webster University. He currently resides with his wife, Marsha, in Laguna, California.

Marvin H. Doniger

Doniger & Associates

Laguna Niguel, CA

949-661-5456