Retirement Planning For The Most Common What-If Scenarios

Retirement Planning For The Most Common What-If Scenarios

Retirement planning in the Chicago, IL market can seem like a daunting task, but it doesn’t have to be. You may have heard that Social Security isn’t enough to live on during your golden years. While there is much truth to this, your individual retirement goals and lifestyle preferences will determine how much you need in order to start saving and investing now.

Have you considered that your income and expenses in retirement aren’t always what you think they’ll be once you stop working full-time? The good news is that there are plenty of strategies you can use, but awareness and action is required! 

A financial advisor in Chicago, IL, at Prism Planning Partners has the time, tools, and talent to help you get on the right track with comprehensive financial planning, no matter the market volatility.

In this article, we’ll cover: 

  • How much money you need to save for retirement 
  • How much you should invest based on your age
  • Some common what-if scenarios such as retiring early or late
  • How to start saving for retirement


You need to have a retirement plan in place before you retire

You shouldn’t just expect that your employer will have a retirement plan for you, and you shouldn’t expect that Social Security will be there when you need it. You are the #1 that cares about your future and wellbeing, so don’t brush it off and think you will get around to it.

If your company offers a 401(k) plan, the key is to make sure that you are contributing enough money each year so that by the time you retire, your nest egg will be large enough to support yourself comfortably during those years when no longer employed. If your company doesn’t offer such a plan, then look into an IRA or Roth IRA as an alternative means of saving for retirement.


How much do you need to save for retirement?

Before you can determine how much money you need to retire, there are several variables that you need to consider. 

First, what is your current income? This will help determine how much money you’re saving each month, which in turn will affect how quickly or slowly your investments grow over time. 

Second, what is your retirement age? What are the Social Security benefits available during this time and will they be enough for the rest of your life? When preparing for retirement in Chicago, IL, you want to make sure you don’t take out benefits too early, as this could be a costly move.

Lastly, what do you expect to spend each year while living in retirement? How much will it cost to maintain a standard of living that includes housing, health care expenses, and food? 

Once all these questions have been answered based on personal circumstances then we can move on to determining how much money needs to be saved up before retiring so as to not run out of money!


Here are some things you should factor into your retirement savings calculations:

  • The cost of living: You need to know what you’ll be spending on a monthly basis, and how much of that will be covered by SS benefits. The amount may surprise you if you haven’t looked at it in a while.
  • Your savings, investments, and other assets: In addition to seeing how much money you’re counting on from Social Security, also consider any other income sources (such as part-time jobs or rental properties), along with any debts or expenses that need paying off before retirement age.
  • Investment returns over time: Know the average return rate for your portfolio so that when market ups and downs occur—and they will—you’ll have an idea of what to expect over the long term. And don’t forget about inflation: It can dramatically impact investment earnings over decades-long periods of time!
  • Taxes on investment gains during retirement years can also reduce your overall income stream by as much as 30%, so make sure this is taken into account when projecting future earnings potentials under different scenarios (for example: saving versus saving less now).


Review your retirement income sources, expenses, and goals

By reviewing the amount of savings you have accumulated, you can determine whether or not it is possible to withdraw more from your retirement accounts without triggering taxes or penalties, and exploring other ways to bring in extra income from non-retirement accounts.

In order to effectively go about comprehensive financial planning in Chicago, IL, it’s in your best interest to get professionally guided help through the support of the experienced team at Prism. We take pride in serving families, individuals, and business owners at every stage of life, whether you are starting to build your wealth, at or nearing retirement, or somewhere in between.

Recalculate your savings goal often

Because the market can change quickly, you may need to make some adjustments by regularly reviewing your retirement savings goals. Not only does the market change, but life changes, which can alter your personal financial standing quickly. Some what-if scenarios include:

  • Starting a family
  • Marriage 
  • Divorce
  • Death of a loved one
  • Inheriting family wealth
  • Retiring in Chicago

Read: Achieve Your Life Goals With Goal-Based Investing


How to start saving for retirement

If you’re part of the 45% of Americans who don’t have a retirement plan, it’s never too late to start saving. If you’re in your 20s or 30s and haven’t started saving for retirement yet, don’t panic—but do get started ASAP. The sooner you start investing for your future, the more time your money has to grow and compound over time.

Here are some smart tips for making sure that happens:

  • Start saving as early as possible: The earlier you begin investing for retirement, the better—and not just because there’s more time for compounding growth! Your savings may also be eligible for certain tax advantages if they’re invested within certain types of accounts—like Roth IRAs or 401(k) plans—that will allow them to grow on a tax-deferred basis instead of being taxed every year like other income sources (like wages). This can help offset some (or all) of what would otherwise be owed in taxes during those years when contributions are made into these accounts.
  • Make saving for retirement habitual or automatic: Setting up automatic transfers into an account each month is one way to make sure that your savings won’t slip through the cracks.
  • Consider how much risk tolerance is right for you: Understanding how investments work is key, as there are many different types out there with varying degrees of risk and return potential. Understanding which investments best match up with where you stand financially will help inform decisions about where exactly those funds should go.

Accounts you can use for retirement savings

The most common investment accounts you can use for retirement savings are:

  • 401(k)s and 403Bs: These accounts are offered by employers and allow employees to save for their retirement through payroll deductions. You can choose from a variety of investment options, including mutual funds that invest in stocks, bonds, cash equivalents, or target-date funds (which automatically adjust your investments as you get closer to retirement).
  • Individual Retirement Accounts (IRAs): IRAs come in two types – Roth IRA and traditional IRA. A traditional IRA offers a tax deduction when contributing money up front but requires withdrawals during retirement when they’re taxed as ordinary income instead of at the lower capital gains rate currently enjoyed by those who invest through 401ks/403Bs and other employer-sponsored plans like SEP IRAs or SIMPLE IRAs. A Roth IRA offers no upfront tax break but allows qualified withdrawals during retirement without being taxed on them at all—making them one of the best tools available today for avoiding taxes on your hard-earned assets!

Make sure you’re taking full advantage of catch-up contributions, if eligible.

If you’re 50 or older, you can contribute an additional $6,000 to your 401(k) and/or IRA. If you have a Roth IRA with no earnings (you haven’t yet taken any withdrawals from it), then this means that you can now contribute up to $7,000 per year (plus any regular contributions).

If your spouse is younger than 50 and has access to catch-up contributions, they can also take advantage of them by contributing more than the standard $6,500 limit on their own account.


Seek professional guidance from Prism Planning Partners

crumpled paper on a blackboard with the words "when, why, what, who, where, how"Look for a financial advisor with many years of experience and who’s willing to work with you as a partner. A good fit will be someone who is dedicated to helping you reach your personal goals, not just collecting fees. Your trusted advisor should be able to provide evidence of their past performance.

A savvy retirement planner should help guide you through the process so that it will be simple for you when it comes time to make important decisions about your portfolio or investments. They should be able to explain what-if scenarios so that when changes occur, such as downsizing or death occurring before retirement age, they won’t cause panic because you have been prepared for them ahead of time by your financial planner!

An expert ally can help you navigate change and reach your financial goals. You don’t have to do it alone.

By formulating a thorough retirement plan with investment strategies based on your risk tolerance, time horizon, and retirement goals, you can ensure that your nest egg does not deplete too soon.

While it’s always good to have an idea of what your retirement will look like, there are no guarantees, so having a solid plan in place is the best decision you can make for you and your family. The best way to prepare for the unexpected is by planning ahead and saving/investing as much as you can. 

If you don’t have your savings strategically organized, start today by giving us a call at Prism Planning Partners! 

Remember, because life is unpredictable, it’s important that you regularly review your retirement goals and seek professional financial advice from someone who knows how to help. We are here for you!

Prism Planning Partners, LLC dba Prism Planning Partners is a Registered Investment Adviser. This article was produced by Paladin Digital Marketing, an entity unrelated to Prism Planning Partners and may not necessarily reflect the expertise of this financial advisor. This publication is not intended to provide investment advice and is intended for your information only. Opinions and forward-looking statements expressed are subject to change without notice. Information based upon third-party sources and data are believed to be accurate and reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All domestic and international rights are reserved. No part of this publication including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Prism Planning Partners. Neither Prism Planning Partners, nor its investment advisor representatives provide legal or tax advice. Please be advised to consult your investment advisor, attorney or tax professional before making any investment decisions.