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Will Your Money Last?

Featured in Senior News March 2007
By Randall E. Snider, Community Bank of Parkersburg
President and Chief Executive Officer

At Community Bank, we believe the best way to reach your goals is to plan for them. You relied on a plan to help you save for retirement. You will also need a plan to help you spend through retirement.

For some, retirement is a long-awaited respite from a job they never liked. For others, it’s the chance to do all those things they never seemed to have time for earlier in life. No matter what plans you have for retirement, it’s easy to think of it in very dramatic terms: One day you’ re working full-time and collecting a pay check every other week and the next you’re retired and living on your savings and investments.

As you move into and through retirement, it is particularly important that you establish specialized plans for generating reliable income to sustain you for the rest of your life. While you cannot know for certain exactly how long you will live, it is possible you may end up spending more years in retirement than the years you spent working. Begin by envisioning the type of retirement you want. Have you always seen your retirement years as a time to relax and do nothing or will your retirement become a time of high activity and purpose?
Estimate your anticipated retirement expenses, designating them into two groups: your essential or must-have expenses and your discretionary or nice-to-have expenses. A rule of thumb among financial advisors is that, when you retire, you need 70 percent or more of your pre-retirement income to live comfortably. But whether or not that rule will apply to you depends on the lifestyle you choose to live both before and during retirement. The 70 percent rule will most often apply to those who lived at or above their means during their working years and who choose to continue doing so in retirement. It will least often apply to those who have lived below their means and continue to do so in retirement.
According to the Retirement Confidence Survey, a large majority of Americans expect to enjoy a comfortable retirement but have not taken the actions needed to turn their aspirations into reality. Here are some of the survey results:

• Saving: More than two-thirds (68 percent) of current workers say they and their spouses have accumulated less than $50,000 in retirement savings.
• Health care costs: Nearly 6 in 10 (58 percent) of current workers say they and their spouses do not expect to receive any health insurance from their employers when they retire. Recent research showed that individuals age 55 who live to age 90 would need to have accumulated $210,000 (by age 65) to pay for insurance to supplement Medicare and out-of-pocket medical expenses in retirement – far more than all but about 10 percent of workers currently have saved for all retirement expenses. Not surprisingly, older workers are more likely to have the retirement assets to pay those costs: 25 percent of workers age 55 and older say they have accumulated more than $250,000 in retirement savings, compared with 12 percent for those 45-54 and 4 percent of workers ages 25-34.
• Longevity: Two-thirds (66 percent) of current workers think they have some chance that they will live until age 90 or spend 25 years in retirement, assuming they retire at age 65. These findings suggest many workers may not be planning and saving enough to finance the full amount of time they expect to spend in retirement, thereby increasing the odds that they will outlive their retirement savings.
• Income replacement: Fourteen percent of current workers said they thought they would need less than 50 percent of their preretirement income to live comfortably in retirement and another 36 percent expected to need 50 - 70 percent. However, 62 percent of current retirees say their income is 70 percent or more of their preretirement income.
• Planning: Nearly 6 in 10 current workers (59 percent) said they hope to have a retirement standard of living equal to or higher than in their working years. But when current workers were asked if they or their spouse have calculated how much money they will need to retire comfortably, nearly 6 in 10 (58 percent) said no. And of those who did do a retirement calculation, 8 percent said they arrived at an answer by guessing.

You need to know all your options before you make a decision. And at Community Bank, we’ll make sure you do – from the most cutting-edge idea to the most common sense choice.
If you have questions about financial planning contact Community Bank’s Brokerage and Investment Services. Paul Mancuso is ready to help make sure you can finance your dream house, trot around the globe, spend your time volunteering your time or get that Ph.D. in philosophy you've always wanted in your retirement years. For more information or a free consultation, call Paul at (304) 420-5569.

We hope your retirement is a wonderful time when you can reflect on the accomplishments of an entire lifetime and look forward to new and different experiences.

About Community Bank

Community Bank has assets in excess of $195 million and total deposits of $130 million. Founded in 1917, Community Bank offers full-service banking, including investment services, as well as making loans to consumers and local businesses. Community Bank delivers customized, personal service and local decision-making combined with the convenience of four Wood County banking offices and cutting-edge technology. For more information, visit www.communitybankpkbg.com.