One of today’s hot topics in wealth management is retirement. To have a realistic opportunity to maintain your lifestyle during retirement, you must be concerned about saving now. Get some tips from the experts in this article.

1. I D E A S T O H E L P
G R O W Y O U R
B U S I N E S S
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O
ne of today’s hot topics in wealth management
is retirement. To have a realistic opportunity to
maintain your lifestyle during retirement, you must
be concerned about saving now. Thankfully, guidance from
retirement planning experts is available to help you set
goals and navigate toward healthy retirement readiness.
A basic question to ask in setting retirement goals is
“how much money will I need?” Industry experts suggest
that, generally, you should expect to replace 70 to 85%
of the income from your last working year. Social Security
benefits typically replace only 30 to 40% of your pre-
retirement income. In most cases, the difference, known
as the “income gap,” will need to be covered by the annual
income generated through your retirement savings. Use
the Rule of 25 which suggests that multiplying your income
gap by 25 will estimate the total amount of assets you
will need to seal the gap. For example, if an individual
has an income need of $50,000 and estimated Social
Security benefits of $15,000 annually, she has an income
gap of $35,000. Multiplying this gap by 25, the resulting
$875,000 represents the amount she will have to amass
by retirement age in order to reach her goal.
So, what are some things to do now in order to help
generate this future income? Make sure you are taking
full advantage of any employer matching program. Also,
establishing a Traditional or Roth IRA is a great way to
save up to an additional $5,000 per year. This amount is
increased to $6,000 per year for those 50 years old and
older. Some annuities guarantee a certain return for life,
which is a good way to protect yourself against the risk
of exhausting your resources during retirement. As a first
step, review your budget to see if a total contribution of 10
to 15% of your annual income to your retirement savings
is possible. This is the percentage that retirement industry
experts recommend.
When you invest the money you save, two of your most
important considerations should be your asset allocation
and time horizon. Historically, a portfolio that is diversified
among multiple asset classes (stocks and bonds,
international and domestic) has shown to lower risk and
increase returns. Also, an investment time horizon of 10
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years and longer is considered long term and risk friendly.
This is because you can take full advantage of the power of
compounding when there are gains in the markets. Even if
the markets were to fall, there is still time to try to recoup
the losses and continue to grow the assets.
When financial experts advise young people to start
saving for retirement and to invest aggressively, they are
emphasizing that time is on their side. As you approach
your desired retirement age, you should taper your
exposure to the stock market and decrease overall volatility
in your portfolio. Target date funds take care of risk
management and diversification automatically. Once you
choose the plan that represents the year closest to your
desired retirement target, the fund will automatically adjust
the risk based on the time horizon left until your retirement.
If you would rather invest outside of target date funds,
mimicking the allocation of the applicable target date fund
will help you taper the risk in your portfolio as you approach
retirement.
Sufficient awareness and active planning are
paramount in successfully achieving your retirement goals.
Seeking the guidance of a retirement planning expert will
help you determine the best strategy for your lifestyle and
time horizon.
ANNA RATHBUN
CBIZ Retirement Plan Services
Cleveland, OH
216.520.6622 • arathbun@cbiz.com