July 18, 2013
|Judith Ward, CFP®, is a senior financial planner and vice president of T. Rowe Price Investment Services.|
The powerful new FuturePathSM financial resource from T. Rowe Price can give you the knowledge you need to achieve the retirement you envision.
Dreaming about the life you see for yourself in retirement can be an effective first step in your overall financial strategy. Think about the places you'd like to go, the pastimes and hobbies you want to pursue, and the visits to family that will fulfill your life. Although you may have committed to saving for retirement for many years, you may not have worked out the details and financial implications of your plans. It can be challenging to get a clear picture of exactly where you stand now—and where you will be in the future. But no matter what kind of retirement you have in mind, you'll want to know the answer to one question: Will my retirement income be enough to support my lifestyle?
Consider Louis and Mary, a couple in their mid- to late 50s who are saving for retirement but juggling so many daily and near-term concerns that it's difficult for them to talk about the steps they could take now and the impact these would have on their future. What if Mary worked a few years longer? How would this change their future financial picture?
The couple has two children—a son finishing college and an older daughter who is planning to get married in a year. They have a mortgage that they plan to pay off by the time they retire, college tuition and car payments, and a love of travel—something they hope to do more often in retirement. At the same time, fully funding their son's final two years of college and paying for the wedding are important goals for them. They still have savings in a 529 plan, but not enough to cover the remaining tuition. Although they both think retiring at age 65 would be ideal, Mary is happy with her job and would consider working longer. The couple has outlined all of these details, but they don't know how their goals and decisions will all add up for retirement.
Many individuals may have an idea about retirement but just haven't made the time to map out how they're going to get there, much less even discuss their thoughts with a spouse or partner. FuturePath provides a vision of the future to help people plan together and explore possibilities so they can be more assured as they near retirement.
FuturePath brings clarity to the complexity of planning for retirement as you manage the demands of your life today. This retirement planning resource provides guidance as you consider the various decisions you'll need to make: when to retire, whether to save more or even less, and at what age to begin your Social Security benefits. After you enter information about your current circumstances and future plans, FuturePath gives you a Confidence Score to help you see how the actions you take can improve your retirement readiness. The resource can also help you and your spouse or partner have a conversation about the life you see for yourselves, the income needed to support that vision, and how you can realize your dreams.
Your current situation. FuturePath enables you to see how your retirement income may be affected by each of your decisions, such as choosing to save more, retire earlier, or work in retirement. The resource's projections are based on your current balances—in T. Rowe Price accounts and accounts held at other financial institutions—and financial details, including salary and savings rate.
What-if scenarios. FuturePath then estimates how your assets may change over time, based on a number of factors, including the amount of income you plan to withdraw during retirement. The online resource even allows investors to include financial considerations—such as additional income, health costs, or paying for a wedding—to help you visualize how those events may affect your retirement.
The adjustments. FuturePath then generates a Confidence Score on a scale up to 100. The Confidence Score suggests how confident you can be about your retirement planning goals by considering two primary risks: 1) the likelihood that your savings will last throughout your retirement; and 2) the likelihood that your portfolio will keep pace with inflation while reducing the impact of short-term market downturns. Current portfolio balances, asset allocations, annual savings, and desired retirement income, among other factors, contribute to the score. Changes made in any one area will affect the score, giving you a good idea of the potential impact your decisions can have.
No matter how near or far away from retirement you are, the actions you take now can have a lasting impact on your life ahead. The power of FuturePath lies in its ability to help you estimate and explore how the decisions you make today can shape your retirement. One overlooked decision-when and how to claim Social Security benefits-may be more complex than you think and have significant implications on your finances throughout the rest of your life.