Planning for Retirement with Thomas Batterman
Financial independence and a reasonable retirement age are the common goals of many working professionals, however, many saving for retirement often make the same critical mistakes. According to a recent survey, approximately fifty-percent of American citizens will retire with little to no money, meaning that half the population encountered several errors somewhere during their retirement process. To help clarify the most common mistakes of saving for retirement, we teamed up with fiduciary advocate of Financial Fiduciaries, Thomas Batterman from Wausau, WI to help us develop his guide to retirement.
Develop a Strict Plan
According to the 2017 Retirement Confidence Survey, only 41% of respondents said that themselves or their partner had an estimated forecast of how much money they will need in their retirement. Thomas Batterman explains that there is no set amount of retirement savings that will work for everyone, but he highly suggests having about 80% of your annual income for each year you plan to be retired. Once you can determine how much money you will need for your retirement, you can start figuring out how you are going to amass that sum. Thomas Batterman stresses the importance of having detailed contingent plans if unforeseen circumstances arise, he adds that accurate forecasting can mitigate problems arising from a disorganized plan.
When developing a plan for your retirement, a critical stage that is often overlooked is medical expenses. Medical expenses tend to gradually increase as a person grows old, so you will need to ensure you have enough health coverage to take care of unexpected costs. While Medicare helps significantly with those expenses after age 65, obtaining adequate coverage is a real issue if you will retire before then. If you do not plan for increased medical costs, you may have to completely restructure your retirement budget. Additionally, don’t depend on the health coverage provided by your employer, as this will only be active while you are employed. There is often COBRA available for a short period of time, but often the cost is prohibitive relative to other coverage options.
One of the more common mistakes individuals make is withdrawing from a savings account at the wrong time. Due to technological advancements propelling innovation within industries, much of the work force chooses to change career paths more frequently than previous generations. Changing of industries more frequently results in contributions to multiple 401k accounts. It is tempting to withdraw from these accounts to simplify your financial life, but there is often a heavy price to pay. Thomas Batterman strongly advocates that prior to withdrawing your account you meet with a professional to discuss the impacts of your potential decision. Thomas Batterman elaborated and told us that in his experience withdrawals under age 59 ½ often result in a 10% Federal penalty (and sometimes a State penalty as well), not including the taxation on income.
Thomas Batterman’s thoughts on Life Expectancy Trends
While the purposes of saving for retirement is to live a specific amount of time with limited incoming cash flows, life expectancy can make retirement much more complex. Thomas Batterman explains that many savers fail to accurately estimate their life expectancy, which in turn results to an inaccurate forecast of the monetary value of savings needed. The issue here arises when savers outlive their retirement plan and must find funds to cover their extra years. The best approach is to live within a cash flow that should sustain the principle value of your portfolio for as long as you live.
As life changes and priorities shift, it will be important to re-evaluate your retirement plan periodically, it should not be considered a one-time activity. A retirement plan is a long-term plan and by sticking to one strategy will result in a faltered output. Thomas Batterman explains that any event in your life that may affect your finances positively or negatively will change your retirement plan, so be sure to check in every five to ten years to make sure your initial plan is still working for you.