section 1 - The American College Online Learning Center

. Save as a percentage of income and not a specified amount so that savingsincrease as income increases.c. Even better — save all raises in the years prior to retirementd. Do not forget to look at options for earning more which can result in additionalsavings.(1) Change jobs(2) Supplemental consulting(3) Second job8. Spending less in retirement can have a significant impact on the retirement income plan.a. Example: Using the same facts as above: 58-year-old single individual with$100,000 of income, assets of $500,000 and currently saving 20% of pay andneeding 85% of income. Remember that if this individual retired at age 65 theincome shortfall occurred at age 81.b. Change spending from 85% to 75% and the income shortfall occurs at age 86.c. In addition, increase the savings rate to 25% and the shortfall is at age 87.d. Retire at age 66 and the shortfall is eliminated — income is achieved to the age90 life expectancy9. Spend less in retirementa. Plan begins with determining how much is needed to meet the client’s desiredlifestyleb. Spending less means a reduced standard of living.c. The more care taken in preparing the spending plan, the more difficult to adjustdownward.d. However, a well prioritized spending plan may make it easier to identify reductions.10. Other options to create significant long-lasting spending reductionsa. Relocating to a location with lower housing and other living expensesb. Downsize to a smaller home or other living arrangement to reduce ongoinghomeowner expenses such as taxes, utilities, and home maintenancec. Sell assets that cost money to maintain (e.g., vacation home, boat, recreationalvehicle) that generate little or no income and have little possibility of investmentgrowth11. Making better spending decisionsa. In some cases, clients who are not careful spenders can maintain a similarlifestyle at a lower cost by finding discounts, bargains or alternative lower-costproducts and services.b. Planning Point: Financial advisors may find clients receptive to tips for helpingthem find bargains and live on less.12. Temporary spending cutsa. Depending upon the withdrawal strategy, temporary reductions in spending canbe meaningfulb. For example, a sustainable withdrawal rate can be increased somewhat if the clientis willing to reduce spending in years of poor or negative investment performance.3.3