Retirement saving plan: part two - ABC 33/40 - Birmingham News, Weather, Sports

Retirement saving plan: part two

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The dream of one day retiring can only be made possible through years of hard work, and a lot of planning.

Of course, everyone's idea of retirement differs. Last Friday on Focus at Four, we looked at saving to enjoy a modest retirement. Now, 
it's about seeing the world and spending more money. 

"You can look at upwards of needing $10,000 a month. With that being the case you're going to need to have set back two million, two and a half million (dollars)," says William Hocutt, a CFP and CPA.

Hocutt says in order to save that much for retirement, a lot depends on whether that person has a solid pension or benefits plan.

"If they don't, and they only have social security they are going to need those assets to make up the difference of the amount."

Hocutt always tells his clients to make the most of their 401k and benefits, to try to save as much as possible.

However, he says the more income someone brings in, the harder it can be to save. 

Hocutt says, "If you have someone pulling out more income they're going to be in a higher tax bracket. Thus they are going to have to put back that much more. The one thing we do know is that tax laws are going to change between here and there."

"Saving through a 401k, automatic investing where it comes out of your paycheck before you even see it, is a good thing to do," says John Pelham, a certified financial planner.

Pelham says a rule of thumb that applies to everyone's retirement plan, regardless of their lifestyle, is the "four percent rule."

"Four percent is a sustainable distribution rate," says Pelham. "How much money is it going to take for you to travel the world if that's what you want to do? If it's going to take $80,000 a year then you're going to need two million dollars."

When it comes to saving for retirement, Pelham advises clients to plan for at least 30 years past retirement age. 

"It's ever changing, things keep moving along. It's very difficult to predict what's going to happen. 30, 40, 50 years from now. But you've got to start early and get prepared."

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