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Are You Prepared for Retirement?
By Chad Carlson

After many rewarding years of working with patients, you want to be able to retire comfortably - and maintain your standard of living during your retirement years. This week, we will address some of the issues that you should be thinking about now to ensure that happens.

How do you reach financial independence?

The first step is to know your definite sources of retirement income. Fixed-income sources include Social Security retirement benefits and assets included in your pension program. At a designated age, monthly payments begin. The amounts may be adjusted from time to time (Social Security, for example, allows for cost-of-living increases). As a rule, though, once your retire, you have no control over the size of your fixed-income payments.

The next step is to know your variable sources of income - all your private savings and investment income. Without an idea of how much will be coming in, it's impossible to establish a realistic plan.

Will you reach financial independence?

Most Americans never achieve financial independence. They face a reduced standard of living because their income decreases when they stop working. They don't plan to fail - but they do fail to plan.

The earlier you start to prepare, the more likely you are to achieve a financially secure future. If you're already retired, you may be wondering how your resources measure up against future needs. In either case, careful planning can help.

Steps in planning for financial independence

By setting a specific retirement goal and establishing a plan to reach that goal, you will greatly improve your prospects for the future. Our experience has shown that this step-by-step approach offers the best potential for success:

1. Set a specific age by which you expect to be financially independent. If there are more than a few years remaining, you may have to be flexible enough to extend your horizon depending on how things go.
2. Estimate your monthly retirement spending need. This is usually 70% - 90% of your pre-retirement spending, adjusted for the rising cost of living.
3. List your fixed sources of retirement income. Your tax-advisor or accountant can provide an estimate of your pension benefit, and your local Social Security office can obtain an estimate of your monthly retirement benefit.
4. Estimate your total investment capital at retirement. This includes the present value of your savings and investments, amounts you can save between now and your retirement age, and the earnings your savings and investments will accumulate.
5. Calculate your variable sources of retirement income. This may be determined by applying a reasonable rate of earnings to the projected value of your investment capital at retirement.
6. Subtract your projected monthly expenses from your projected monthly income. The result is your projected monthly cash flow at retirement.

A trusted advisor can provide valuable, timesaving assistance in your planning for financial independence by suggesting an appropriate savings program and/or investments that suit your individual needs, goals, and investment philosophy. Manage more than just your money---invest your time now to establish a plan that will allow you to achieve and maintain your financial freedom.

Chad Carlson is a Financial Advisor with Delta Trust Investments, Inc. For more information, contact Chad at (501) 975-4010 or by email at ccarlson@delta-trust.com. Delta Trust does not offer tax or legal advice and recommends that you consult your tax or legal advisor.