Do I have enough for retirement?

“Do I have enough?” is one of the most common questions asked as clients think about taking the leap into retirement.  Behind it is the fear that they won’t have enough money to enjoy the kind of lifestyle they dream of – or worse yet, that they will run out of money in their old age and have to depend on family or others to help make ends meet. Rules of thumb abound – such as the idea that in retirement you can live on 70% or 80% of what you spent while working.  While this may be true for some, many retirees find that they don’t spend less in retirement, and some find they even spend more (for travel, a second home, etc.).
Another trap is that all too often people just consider cash flow.  If they have enough coming in during the early years of retirement to meet their needs (through investments, pensions and social security), they assume everything will work out fine over the coming years.  However, often pensions and Social Security don’t keep pace with inflation.  To avoid a declining standard of living, careful planning can be required. 
The only really sure way to be sure you don’t “run out of money before you run out of you” is to estimate your inflation-adjusted spending needs over your projected life span and compare that to your resources – what is your portfolio capable of producing and what other resources do you have (pensions, Social Security, etc.)?  Monte Carlo simulation then considers the impact of a variety of possible financial markets, good and bad.  With this “gap analysis,” we then devise an action plan to address any shortfall, and provide “bumper guards” for safe levels of spending throughout retirement.