Are you one of the millions of Americans using a qualified plan such as a 401(k) or 403(b) to save for retirement? Do you also contribute to a traditional or Roth IRA? These vehicles are powerful retirement accounts because they offer tax-deferred growth. That means you avoid paying taxes on growth while the assets are in the account.

While you may have an idea of the balance of your accounts, have you estimated the potential income your qualified accounts will generate in retirement? If you answered no, you’re not alone. A recent study from the LIMRA Secure Retirement Institute (LIMRA SRI) found that more than half of all workers don’t know how their retirement assets will translate into income.1

The LIMRA study found that a retirement income estimate can boost your confidence in your retirement strategy. Almost 70 percent of the surveyed participants said they were more confident in their ability to retire after estimating their income. Of those who hadn’t estimated their income, only 30 percent were confident.1

You can use a retirement income estimate to gain insight into your planning and make important changes. You may see that you need to increase your contributions or perhaps make a change to your allocation. Below are a few tips on how to use a retirement income estimate in your planning:


Make a list of all retirement accounts and assets.


There was a time when people worked for the same employer for most of their career. Those days are long gone. Today, many people make multiple job changes throughout their career. Each time they do, they may leave a 401(k) account behind at their old employer. It’s possible that you have old 401(k) plans and IRAs spread across multiple employers and financial institutions.

The first step in developing your retirement income estimate is to make an inventory of your accounts and assets. Gather statements from your investment accounts. Contact old employers to get information on old 401(k) balances, deferred compensation and even pension benefits. You can also use a tool on the Social Security Administration’s website to estimate your benefits.

Once you’ve gathered that information, consolidate it in one report. You may need to work with a financial professional to convert your balance information into an income estimate. However, adding up your total assets and income is a good first step.


Project various withdrawal rates.


Once you’ve gathered your balance information, the next step is to project your retirement income. There are a few ways to do this, including some simple formulas for a quick estimate.

For example, you might assume that you can withdraw 4 percent of your retirement assets each year, as that would hypothetically last 25 years.

Be careful with quick estimates, though. They’re not always accurate. Your income is likely to fluctuate throughout your retirement. Also, your cost of living may increase because of inflation and rising health care costs. Your asset values might fluctuate, causing you to change your withdrawal amount. A quick estimate doesn’t account for those variables.

A more effective approach may be to work with a financial professional to run retirement withdrawal simulations. For example, your financial professional may be able to use software to model different rates of return and withdrawal amounts to show you what is sustainable in retirement. That could give you more confidence or help you identify areas for adjustment.


Create an estimated retirement budget and compare it with your income projections.


A budget is always a helpful financial tool, but it’s especially powerful when planning for retirement. You can project your retirement expenses based on your current spending and inflation. You can then compare your estimated spending with your projected retirement income.

If your income exceeds your expenses, you may be on the right track. If there’s a gap, you may need to do more work and consider saving more money to reach your retirement goal.

Again, this is a process in which you may benefit from speaking with a financial professional. They have experience building retirement budgets and can advise you on costs and issues that you may not have anticipated.

Ready to estimate your income and boost your retirement confidence? Let’s talk about it. Contact us today at Oliver Financial Group. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.




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