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You may be familiar with the “rule of thumb” that says most people will need between 70% and 80% of their pre-retirement income each year after they retire. However, this estimate is overly simplistic and should only be considered a general guideline. Many of my clients’ real needs are much more complex. In fact, as Americans continue to live longer and lead more active lives, many are finding they need as much as 100% of their pre-retirement income to continue supporting their lifestyle, particularly in the earlier years of life after work.
Transitioning from a lifetime of work to a lifestyle without work is certainly a significant milestone. And it’s important to understand that your retirement years may be dramatically more complex and last even longer than the years you spent working. That fact alone—that you may spend more time retired than you spend working and saving for retirement—makes it critical to have a well-prepared plan in place before deciding when to retire.
I began my career as a financial advisor at an extraordinary time, riding the coattails of the “Goldilocks Economy” of the 1990s. This was a protracted period of low inflation, low unemployment, relatively small federal debt, government surpluses and financial deregulation.