PLANADVISER - May/June 2019 - 43

style expectations for retirement. " Some retire and want to
travel or maybe have a second home, while others may just
want to spend time with their grandchildren, " he says.
" It's about what the person wants to do, moving forward, "
Foguth agrees. " A lower-paid employee may have a lower
standard of living prior to retirement, but that doesn't mean
he wants his retirement lifestyle to be the same. " He adds
that advisers will need the numbers for all of the person's
expected income sources-Social Security, pensions, assets
from defined contribution (DC) plans, other savings, etc.
Also in calculating the projection, the adviser must
consider the net amount the person will need, and be
mindful of changing expenses, Foguth says. " Many people
say they want the same gross income they are making
before retirement, but they need to realize they don't live on
100% of their gross income during their working years. They
live on net income after taxes, retirement plan savings and
perhaps medical premiums are taken out. "
Walter Wisniewski, CFP, owner of Arcadia Wealth
Management in Smithtown, New York-and co-author with
his daughter, Allison Vanaski, CFP, of the book " The Millionaire
Within " -says many retirement income calculators
overlook taxes and/or inflation.
Another factor for the adviser to consider-and another
omission by calculators, Amabile says-is that the retiree
may find other employment, which will affect total income.
" We're just starting to see the impact of the 'gig economy' on
seniors. On-demand jobs will let older workers dynamically
supplement their income and savings, " she says, noting that
retirement readiness calculators should let users anticipate
additional earnings through part-time work, to provide an
accurate view of the future.
Advisers should also mention that the participant, once
retired, may spend more, out of pocket, than when he was
employed, Foguth says. " When you're working, you do most
fun things on Saturday and Sunday. When you're retired,
you have six Saturdays and one Sunday, " he says, adding
that retirees today are more active than those in past
decades. " They're not likely to spend retirement sitting in a
rocking chair on the front porch, reading. "
Such expenses can be estimated. But there are the
unknowns to keep in mind, Wisniewski says. People do not
know how healthy they will be, when they will die, what
investment returns they will accumulate, he says. " There's
no hard-and-fast rule, but these three unknowns are the
same for everyone. "
'How Much Can You Live On?'
Hernandez says the annual 4% withdrawal rule is comfortable
for spending if a person stays invested in stock and
bond mutual funds. " I've been in the business for 30 years,
and when I went through CFP training, 5% to 6% was a
comfortable spending rate. What I believe has changed is
market volatility, " he says.
planadviser.com May-June 2019 | 43
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