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Pre-Retirement Financial Prep

by Chris Cooper, Financial Planning Expert
March 02, 2017

Question: I am a 55 year old man planning on retiring in 5 years. How much should I be saving?

Answer: First, I must ask, if you are planning on retiring in 5 years, do you know if you can afford to retire in 5 years? A lot of people get an arbitrary idea of when to retire, like at age 60, or 62, or because some event in their employer will occur if they don’t retire at the arbitrary date (such as the health insurance plan will not be the same for those retiring after a certain date) so it makes you pick a date to retire that you may not be ready for financially or emotionally. 
 
Are you ready to do something else with your time than work for a living?   I find that people who definitely have something they would rather be doing than working for a living set more realistic goals and actually accomplish them.   Many of my professional colleagues (doctors and lawyers in particular) often can’t imagine their lives not involving their profession, so they actually have no real hobbies outside of their work, or have never considered another career within their own professions.  Do you know what you will be doing with all your time when you retire besides cleaning out the garage, the “honey-do” list, drinking all afternoon at happy hour, or what?
 
Now for the sake of discussion here let’s say you have a plan for your time, so now how much can I afford in retirement and how long will it last?  This second question “how long will it last” has two issues: will you run out of money before you die, or will you run out of “health” before you die?  Many people retire and then are caregiving for another or they themselves may need a caregiver!  Health, especially mental health, is a critical factor in retirement, more so than money. 
 
Some of us will live a long, long life (greater than 80 years) so how much should we be saving?  AS MUCH AS YOU POSSIBLY CAN!   Here’s a quick way to measure your financial preparedness:  gather the information on your pension (if you will have a monthly pension), your social security (if you are covered by it) and look for the amount you will receive on a monthly basis.   Then look at your investments in 401(k), 403(b), 457,  IRA’s, and annuities and multiply the value of all these accounts by 5% and then divide this number by 12 (to get an approximate monthly figure).  Now add all these monthly amounts together and compare them to you take home pay – are you under or over? If you are under, consider saving and investing more and working longer past 60.

Chris Cooper is the owner and founder of Chris Cooper & Company, Inc., a fee-only financial planning firm for elderly persons and the owner and founder of ElderCare Advocates, Inc. a private geriatric care management and long term care consulting firm. As a California Licensed Professional Fiduciary, Chris can serve as  Conservator of the Person and Estate under court appointment,  as Agent under a Durable Power of Attorney for Financial matters and Health Care matters.

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