In our spending society, it is difficult for people to understand how much they can realistically spend and how much they need to save.

One of our goals is to keep you on track and prevent you from making the big mistakes. Most people simply do not look at their situation in a truly comprehensive way. Even when they try, a few oversights combined with some bad luck can turn a good plan into a mess. We all know people who appeared to have successful careers and yet are somehow running out of money during retirement. What went wrong?

The most common problem is that they have overspent and not saved enough. They may have a house that they cannot afford, take elaborate vacations, drive expensive cars, and spend a fortune on their children’s private schools and college education without carefully considering price and value. Meanwhile, they save too little.

If you are making $250,000 a year and think that saving $18,000 annually in a 401(k) is enough, you should think again. You will need $2 million in investment assets to simply generate $80,000 of income in retirement, unless you are planning to draw down the principal. This assumes a 4 percent withdrawal rate. An income of $80,000 plus Social Security is a long ways from $250,000. In this case I am assuming your portfolio generates a total return of about 6 percent on average over time from a combination of dividends, interest, and capital appreciation. You spend 4 percent and reinvest 2 percent so that your assets rise and your income over time keeps up with inflation.*

And what happens if your career is cut short and you are laid off in your 50s? It has happened to many people.

One way we help clients stay on track is through the use of our “Unique Wealth Worksheet.” We have presented this at a number of conferences for other advisors, and it has been received with great interest. It allows us and the client to have a really clear understanding of the long-term changes in their overall situation.

Do you routinely giving to charity? Take my quick assessment to see if you’re taking advantage of the most beneficial tax strategies available to you! Please click here to begin.


Any opinions are those of Douglas Gross and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

*This is a hypothetical illustration and is not intended to reflect the actual performance of any particular security. Future performance cannot be guaranteed and investment yields will fluctuate with market conditions.