It used to be that when you thought of someone retired you’d imagine them sitting in a rocking chair knitting, maybe with a blanket across their knees. These days, most of us like to imagine an active retirement, filled with travel and adventure. Whether you plan to retire at 62 or at 82, the post-work-years can be a time to live life to the fullest.

If you imagine your retirement paddling around Lake Como or hiking the Alps, you’ll need to put some things in place starting right about now to afford that kind of lifestyle.

Because employees change jobs so often, the pension structures that used to support retirees (in combination with Social Security benefits) can no longer be relied upon to the extent they were in the past. The traditional sources for post-work income in the form of social security and pensions are less robust today than they were say, 30 years ago.  That, in combination with longer life spans and the expectation of good health well into your 70s (at least!) means you’re going to need additional income to support your lifestyle in retirement. By most estimates, you’ll need between 60% and 100% of your current income in order to keep up with your current lifestyle in retirement.

Setting up retirement savings now is key to a comfortable retirement

Adults who are in their 40s, or 50s now can’t bank on Social Security to fund their retirement.  At the time of this article’s writing, Social Security is estimated to cover only about a third of the current retiree’s income and that number will continue to dwindle. In fact, according to the Social Security website by 2037 benefits will be exhausted. (source:

Because of inflation the numbers associated with maintaining your current income levels might surprise you (and not necessarily in a good way).  At an average inflation rate of 3%, the cost of living would double in 24 years. So, if you are 40 years old today and you make $80,000/year, you’ll need to be bringing in $160,000 when you’re 64 and beyond. 

You’ll also want to factor in increased medical costs in retirement. Falls and unforeseen illnesses such as stroke or heart attack can send medical bills soaring. 

Whether you imagine a modest or a luxurious retirement the numbers point to the need to save now to prepare for your later years. If you do want to travel and have luxury experiences, well, you’re going to need even more money. For entertainment purposes only, let’s run some numbers to estimate what a person who makes a significant income currently would need to put away to meet their retirement goals. (not for financial planning purposes, for illustration only) 

How Much Would You Need for a Luxurious Retirement?

For the sake of this calculation, let’s assume you’ll need 85% of your current income to retire in style. 

  1. If you are currently making $140,000 and have 20 years until retirement, you’ll multiply your income by two: $140,000 x 2 = $280,000 this is assuming about a 2% inflation. 
  2. Since we chose 85%, now we’ll multiply the sum by that number: $280,000 x .85 = $238,000
  3. Now subtract your social security benefits SS.GOV CALCULATOR (we got $35K) $203,000 (this is questionable since the previous reference states the funds will be exhausted)
  4. Now multiply that total by 20 (to find amount of money you would need to last you if you live 30 years) = $406,000
  5. Take all your savings and investments and multiply it by 5% (since we’re looking at a 20 year timeline)  $3,000,000 x 5% = $1,500,000
  6. In this scenario, you will need an additional: $1,094,000
  7. Assuming an 8% annual return, divide that number by 50. So you’ll want to set aside: $22,000.00 a year

Calculator based on tables linked here: 

As with any online calculator, this is a rough estimate and should not be construed as financial guidance.  Speak to your financial planner to better understand your goals. 

How Else Can You Prepare for Retirement?

While there are pensions, social security and there may be unforeseen inheritances, relying on government support will not lead to the action-packed retirement outlined at the beginning of this article. The good news is the earlier you start saving the better because compounding interest really adds up over time. 

Using resources like 401k retirement savings plans, Defined Benefit plans, and other tax-deferred retirement options can help put your funds to work for you. 

Did you know: If someone starts investing at 25 vs 35 those 10 years can yield nearly triple the savings?!  As with all investments, there are no guarantees any investment will provide the same results as described or experienced by someone else.

Taking the time to discuss your goals with your financial planner can help create clarity around how much money you should set aside and what tools are best for your unique situation.  With good planning and forethought, you can set up the right structures to support your financial and retirement goals.

Did you recently receive an inheritance that included a retirement account, such as a 401(k) or IRA? You may wonder when you should and are required to take distributions and what investment strategy will be most effective for your financial situation.

The main characteristic of a retirement program inheritance is that most beneficiaries must deplete the account’s funds within 10 years of the original account holder’s passing. The 10-year rule, passed within the SECURE Act in December 2019, does not specify an amount you must distribute, just that you must withdraw all the funds within 10 years. There are a few exceptions to the 10-year timeframe you may qualify for if you’re the legal spouse not more than 10 years younger than the decedent, chronically ill, or disabled. Different rules apply to minor beneficiaries.

For the sake of this blog, we will focus on non-spouse recipients who do not meet any exceptions. When you decide to take your distributions will determine the type of investment strategy that will best fit your financial needs. Let’s discuss what you should consider when selecting your withdrawal strategy.

Choosing a Withdrawal Strategy

When you decide to start taking distributions may be different from someone else’s approach for several reasons. Below, we’ll outline what may help you determine your withdrawal schedule and how it will affect your investment strategy and planning.

  • Your current financial situation. If you need the additional cash flow now, taking a lump sum may be an effective path to explore with your inheritance. You should, however, consider how a lump sum will affect your taxes if the account is considerable. Immediate withdrawals could also affect your investment risk tolerance if you plan to rely on the distributions as an extra income stream. However, if you do not need additional income, you may consider how the funds can grow tax-free for a few years or the entire 10 years to take advantage of market fluctuations.

  • Your next life stage. Are you retiring soon? If you’re planning to retire within five years, your inheritance can be another form of retirement income. In this case, you’ll want to discuss with your financial advisor your options and how a little more risk could benefit your long-term savings. However, let’s say you have seven to 10 years or longer until your retirement. Then, you may benefit from a more aggressive investment strategy and possibly two market cycles to potentially add more value.

  • Your tax impact. Whenever you decide to start taking your distributions, you should consult with a tax professional about possible tax implications. Every type of retirement account has different taxation on distributions, so it’s helpful to evaluate how your taxes could be affected. If the account is significant, a lump sum may push you into a high tax bracket, and you may determine withdrawing a monthly amount may mitigate a higher tax burden. If the amount is smaller, perhaps a longer-term approach will produce higher, tax-free returns within the required timeframe.

While the 10-year rule may limit when and how to use or invest your money, you have several investment and planning options based on the type of retirement program you inherited, your current financial situation, and your future goals. Once you decide on your withdrawal strategy, it will better inform how to invest your funds to meet your needs. We can help you navigate the different scenarios to understand the short- and long-term financial implications of your withdrawal and investment approach. Contact our team to learn how we can guide you through the complex rules associated with your retirement program inheritance so you can plan for today and prepare for the future.

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.