With the baby boomer generation hitting retirement, determining how much wealth needs to be accumulated before big life events, such as retirement, is a question that I spend a lot of time working through with individuals and couples. The rule of thumb used to be that if you had a million dollars, you could retire. More recently, I’ve heard some people throw around the two million number. But in my experience, I don’t think any rule of thumb is all that useful because needs vary dramatically from person to person. For this reason, the first step required to answer the question for YOU is to make sure that you have partnered with a financial professional who can help you take a bird’s eye view of your situation through a comprehensive financial planning process. Laying out your assets, cash flow expectations and expenses using a relatively simple, but conservative approach, is the only way to concretely come to some conclusions.
Once you have a plan with some projections in place, then you can ask yourself the important questions, such as:
- Do I really NEED all the wealth I’ve created?
- Are there opportunities to increase my charitable giving?
- Do I need to save more for the future, or simply cut back on my lifestyle choices?
- Do I need to be taking as much risk in my portfolio, or will a lower return, with less risk, still provide for my needs?
- What is going to happen to my wealth when I pass away?
- Now that I know what I’ll be leaving my children at various stages of my life, how will the magnitude of this inheritance affect them?
- Will my estate be subject to significant tax obligations?
- Are there ways that I can better preserve my wealth for my family’s future?
At Capstone, we work with our clients to both identify and answer these critically important questions.
Maria Dawes, Portfolio Manager
Capstone Private Wealth