Estate Planning Vault

Adjust Your Assumptions

In planning for retirement, many people base projected income requirements on faulty assumptions. The following are some of the most common:

• Assuming the market will always yield double-digit returns. Using a more conservative return rate, such as 5% to 7% will provide for better planning.
   
• Depending on Social Security to fund their retirement. Although most experts believe Social Security will continue to exist in some form, future retirees shouldn’t rely on it as their sole source of retirement income.
   
• Believing they will not live past age 80 or 85. People are living longer than ever before, so statistically speaking, it’s likely you will, too.
   
• Failing to factor in inflation. Assuming an inflation rate of 3% per year, in 20 years about $5,500 will be needed to equal $3,000 today.
   
• Planning their retirement age. A recent survey by the Employee Benefits Research Institute, Greenwald & Associates, and the American Savings Education Council indicated 43% of “early retirees” retired sooner than they had planned typically due to unforeseen circumstances such as layoffs or health issues.
   

Source: The Daily Independent, 11-16-06