How to Plan for Retirement: Identifying the Gap

Daydreaming about retiring can be inspiring but thinking about retirement is different from planning for retirement. Every retirement plan has to balance three main goals:

1. Maximize your enjoyment of retirement
2. Manage the risk of outliving your income
3. Manage the risk of unexpected life events and investment risk

The difference between your annual income needed and your retirement income streams is your gap, and that’s what needs to be solved with your savings and investments, including real estate. Retirement income is usually defined by Social Security and pensions. You may have a handle on current expenses, but many expenses change in retirement, like health care, long term care, travel, etc. The gap between income and expenses may give us an idea of the annual income needed in retirement. The gap gives your personal financial plan a clear objective for your investment portfolio, which may also include real estate. 

A general rule of thumb is that you’ll need 60-90% of your pre-retirement income, but that can change for every person which is why we create a personal financial plan, custom investment portfolio and meet with you and review your plan. Your life and plan can't be perfectly defined by rules of thumb. That's why we're here to tailor the financial advice to your specific situation.