Retirement Savings: Ensure a Full Pot of Gold

We all dream of having a potof gold toward the end oflife's rainbow. For manyphysicians, they're discovering the potis half empty. As you near retirement,the reality of ever-increasing costs ofliving coupled with market downturnsleave many wondering if theywill have enough to retire. Just howmuch should you save to maintain thestandard of living you desire? Whatare some factors to consider whenmaking your calculations?

You should aspire to be financiallyindependent in retirement; you'll likelyrely heavily on your asset base forincome, particularly your financialportfolio. Your asset base could alsoinclude your house, rental property,and business ownership. Achieving asufficient financial asset base fromwhich to fund retirement involves thefollowing three basic steps:

Step 1. Determine retirement spendingneeds.

Step 2. Determine how sizable yourportfolio must be at the onset of retirementto fulfill those spending needs duringyour retirement distribution phase.

Step 3. Determine how much mustbe saved and invested from now untilyour planned retirement age to fulfillyour financial goal(s).

That first step, calculating howmuch you will spend in retirement, canbe a challenge. Most retirement specialistssuggest that you will need at least75% to 80% of your current income toretire with the same lifestyle you havetoday. But because the accuracy of yourcalculation will have a direct reflectionon the quality of your life in retirement,it's a good idea to use more realistic figures.This means taking other importantconsiderations into account, likewhere you plan to live in retirement,what you expect to do, and whichexpenses are likely to go away andwhich might take their place. Don't forgetto think about the impact of theincrease of the average human's lifespan, taxes, and inflation.

Robert J. Lee II, AWMA, AAMS, vice president-financial consultant with CharlesSchwab & Co, Inc in the Norfolk, Virginia,branch location, is responsible for managingapproximately $300 million. He specializesin providing wealth management solutions to affluent familiesand privately held corporations. Charles Schwab & Co,Inc, all rights reserved. Member SIPC. The Schwab Centerfor Investment Research is a division of Charles Schwab &Co, Inc (0505-7381).