Inside Look at Your 401k

When I sit with my older clients, primarily of baby boomer age, the look on their face says it all. They simply don't have enough to retire and stay retired. Most people don't sit with a Financial Professional until 5 years before their retirement goal. More often than not, it's too late.

Hypothetically speaking, let's say you have an old 401k of about $175k and you're 65 years old. You're about to start drawing from it directly. Now, let's say you're going to draw 10% per year which totals $17,500. Of that $17,500, deduct the taxes (25% in this example but varies based on tax bracket). So you'll receive $12,625. Divided into 12 months that's $1,052 per month.

Now, if you had social security benefits (fund is soon to be depleted) and you are collecting $1,300 per month, your income is approximately $2,352 per month. However, your $175k is not a guaranteed income stream. Once your account reaches $0 value, you are out of money. That leaves you with $1,300 per month at the age of 75. How about some more math? The average retirement lifespan is 18 years that means that for the next 8 years, you're going to live on $1,300 per month. I haven't gotten into medical expenses that you'll incur during your golden years.

Do your joints ache just thinking about it? Imagine those who are living just like this at the age of 75. Your parents, grandparents, aunts, uncles, etc., this is their reality. The question to ask yourself is will this be you in a decade, two, or three?

FYI. As of January 6, 2016, the average savings of someone who is between 65 and 74 years old is $148,000. So, I gave you more money in my example above.

Plan now or fail later.