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                                                                                   www.brownandbrownpc.com

                                                                                    1250 E. Sherwood Drive

                                                                                     Grand Junction, Colorado 81501

                                                                                         Phone: (970) 243-8250  ♦  Fax: (970) 241-1144

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                                                 Baird B. Brown             Clara Brown Shaffer              Shauna C. Clemmer                    Daniel F. Fitzgerald

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                      "Accumulating wealth is one thing. Preserving it is another. Let our family help yours."                                                                                                                                                                           

Special Report

When Can I Retire?  What are common mistakes to avoid? 

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Q: When can I retire? I am tired!

A: That is a question we are often asked and there is not really a good answer. First, you must take control of your                     expenses. Make a list of what you will need to spend on a monthly basis. We would recommend dividing the expenses         into fixed/mandatory expenses (such as health insurance, home mortgage, taxes, insurance, car payments, utility bills,         etc.) and variable/optional expenses (such as entertainment, travel, gifts to grandchildren, eating out, etc.).

     Next, you must evaluate your income sources. Most of us will have Social Security or some other form of pension. If           you don’t know how much you might receive, go to the Social Security Administration office or the office that pays             your pension and discuss with them the amount of income you are likely to receive. Once you have a handle on your           expenses and potential sources of income, you can then begin to work on your nest egg and calculate how big it must           be.

     Let’s assume your yearly income is $20,000, but that you believe your annual expenses will be $35,000 in 2022 dollars.       This leaves you a shortfall of $15,000. Let’s also assume you are a 60-year-old female in good health and therefore will       have a life expectancy of 24.79 years (which is the number of years our 60-year-old female has to live according to the       Social Security Administration). If you lived out your life expectancy precisely and were able earn 5% after tax for the       remainder of your life, you would need to have $209,070.33 in your investment account in 2022 dollars. This                       calculation will assume that at age 84.79 years, you have spent your last investment dollar!

     

     Many individuals don’t wish to cut it quite so close and spend their last dollar. So, you must either:

  • live on less

  • retire later

  • work part time to fill in the shortfall, or

  • build your nest egg larger before retiring.

     

     There are some great retirement calculators which you can access on the internet. One we like in particular is the T.             Rowe Price calculator which can be found at www.TRowePrice.com. Go to Resources and Retirement Income                     Calculator. Based on your assets, it will help you determine investment mix, age and life expectancy, and what the               likelihood will be that your investments will last long enough.

    

      From our experience, many clients don’t really want to retire. They factor into the above equation a part time job to              supplement their income. It reduces the amount of income they need and also keeps them socially interactive. Many of        our clients are coming out of retirement and wanting to involve themselves in part-time employment or perhaps                    community service. You can only play so many rounds of golf, bridge or tennis. So, when to retire is a very personal           decision and does not hinge on financial resources alone. Prospective retirees beware!

 

Q: What legal mistakes are most commonly made by retirees?

A: Although not in any particular order, we suggest the following five are the most common mistakes:

  1. Not communicating their wishes to heirs regarding the distribution of their estate. If your plan is likely to cause your heirs to fight after you are gone, don’t leave it to the cold hard document to tell them of your wishes. Tell them while you are alive, document your desires in writing (through a will, trust or however), and include a clause in your estate plan that if anyone contests the plan they will forfeit their inheritance.

   2. Waiting too long to get their affairs in order is a very common mistake. If you are incapacitated mentally, you cannot           formulate and execute an estate plan. Many retirees are living beyond the time when they have well documented legal         capacity and the options available to them to plan are greatly reduced.

   3. Non-probate assets will often cause problems with your estate plan. Make sure they are coordinated with your estate           plan to insure you don’t defeat your estate plan. For instance, don’t leave your estate to three children, but place the             majority of your estate in joint tenancy with one of the children. The joint tenancy assets don’t have to be divided                 amongst all three children, and that can cause problems if it is your intent that it be shared.

   4. Most retirees don’t think much about the possibility they might end up in a nursing home. Skilled nursing homes in             Colorado currently costs about $8,609 per month in 2022. Make sure you have a plan to pay the cost of such care,               whether that be private pay, long-term care insurance, Medicaid, or an inheritance from your rich uncle. You and your         family don’t want any surprises.

   5. Not working long enough can be a big mistake. We are living longer. That is good and bad. The longer we live, the               more money we may need in the later years of our lives. Make sure you have enough resources to retire. “Enough”             depends upon many factors including your lifestyle, the size of your nest egg, and your ability to earn through part               time employment. Be careful not to sell yourself short on how much you might need.

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