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Retirement Funding & Personal Finance
Learn how to fund your retirement in a manner that allows you to enjoy retirement

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Retirement Funding & Your Future Financial Success

It is important that you fund your retirement in a manner that is in your best interest. Even if your discretionary income is low—or your current expenses are high, you must put together a plan that will take you to where you need or desire to be—in your retirement years!

No one knows what the financial markets will do in the future in the short, intermediate—or long term, however there are things that “you” can “control” to increase your odds of success in the future.

The power to control the following as it relates to your investing lies within you—as "far" as you can see:

  • Your "fees" that you will pay

  • Your "asset allocation"
  • Your "risk exposure"

It is also your responsibility to know your portfolio’s rate of return in comparison to appropriate market indexes over the past year—3 years—5 years etcetera!

You can see how your portfolio is doing relative to appropriate benchmarks by visiting the appropriate sites.

If you have a mixture of large and small cap mutual funds—you can compare your overall return to that of the Wilshire 5000 Index or the Vanguard Total Stock Market Index Fund—if they are United States Mutual Funds.

If you have a mixture of Domestic and International Funds—you can compare your return with the Vanguard Total Stock Index Fund. For Bonds—the Vanguard Total Bond Index Fund will work as an appropriate benchmark.

By doing the comparison on a consistent (at least yearly) basis you can view the total return of both the index fund and the fund you are comparing it with.

Be aware that the comparison should be with an “index fund” (considers dividends and expenses—or total return—not just change in price) as opposed to and “index” (only considers change in price)—that way you can make the comparison on investment sites such as Morningstar and others that use total return as the benchmark.

In today’s financial environment many companies and brokerages have appropriate benchmark tools that you can use free of charge—or for a stated fee that will show your performance relative to the overall market.

You can go to or and aggregate your portfolio’s—to track your overall return more effectively.

By making an appropriate comparison you will know if it is in your best interest to hold—or sell.

If a fund that you own have returns that have been less than appropriate on a consistent basis (several percentage points behind those in their class for several years)—you may want to sell.

If you have funds that are being managed—consider the cost of that management as many managed funds lag the return of appropriate benchmarks.

In many cases you can do just as effective a job or better at selecting appropriate funds for your portfolio as the professionals.

It is important that you put a plan in place so that you can reach "your" retirement number!

However, if you plan on investing in emerging international markets and small and mid-size stock funds, a managed fund should be given serious consideration.

How Much Should I Contribute to my Retirement Account?

The amount that you should contribute will depend on where you are in your “life stage”—your current earnings and your future retirement goals at a minimum.

If you are now working—are you contributing to your retirement plan (401k, pension, IRA whether ROTH or Traditional) at the appropriate level?

Will you be able to self-fund your long-term care (LTC) needs or will you need insurance?

What is the appropriate level—you ask?

That depends on your future goals—your age and who you ask!

If your employer offers a match in your 401k or 403b plan—be sure to contribute up to the match—if at all possible!

However, general consensus in the financial industry is that you should receive at least 85% of your pre-retirement (final year of your salary while you are working) income to live at a comfortable level—however you must also consider compensating factors (will my house be paid off, will my spouse continue to work, will I be totally debt free, am I factoring in rising health costs and rising long-term-care insurance costs etcetera).

That 85% will consist of your pension, 401k, IRA—Social Security and any other streams of income that you will receive during your retirement years.

If you are now age 40 and you don’t have 2 times your annual salary saved—you are behind schedule in most cases.  If you are age 50 and you don’t have 4 times your salary saved—you too are behind schedule.

If you are age 60 and you don’t have at least 8 times your salary saved—you too are well behind schedule.

Keep in mind that the above benchmarks are general in nature—as your “compensating factors” and your unique “personal situation” must also be factored in.

So, depending on where you are at you may need to save a higher percentage of your income to reach the level of income that is needed during your retirement years.

If you have not done so already, it is imperative that you establish a debt payoff—or debt pay-down plan, you properly establish an emergency fund and you save monthly at the appropriate level that is needed.

If you have payed off or payed down your debt, and you have properly established an emergency fund, you are now in position (if you have not been doing so already) to save monthly so that you can reach your retirement goals.

If you are age 40 and earn $50,000 annually and you have not started saving, you will need to be more aggressive by saving 15% ($7,500 or more—annually) or more of your income.

If however, you have $100,000 or more saved (in your retirement accounts)—you could possibly save 10% ($5,000) for the next 20 years and reach your retirement needs.

If you reach age 70 and realize that you have your health and long-term care insurance properly in place
and you have $600,000 in your retirement account, you could take out $30,000 annually for twenty years and still outlive your retirement savings.

If you also received $1,500 per month in social security income—you would easily replace 85% of your income.

If you were totally debt-free you can easily see that you would enjoy life on your terms!

You would be in position to possibly assist your grand-kids with their educational needs, take the vacations of your dreams, purchase that boat or vacation home that you always wanted or pursue many other goals and objectives that you may have in mind.

You must ensure that the amount of your savings will outlast your life—the more you save—the better the odds are that you will outlive your savings!

If you have not yet started and/or are unable to contribute 15% or more, despite having reduced your debt and establishing an emergency fund—you can still put a plan in place that will get you on target by increasing your annual savings rate by 1-2% a year until you reach the 15% (or more) contribution level.

Be sure to consider automatic withdrawals from your checking account to fund your retirement accounts—whether it be a 401k or 403b with your employer or self-direct IRA accounts (2013 maximum contribution $5,500—or $6,500 if age 50 or higher)—whether ROTH or Traditional.

By doing so you will enhance your vision and focus and increase the odds of outliving your retirement funds.

How Should I Apportion My Investments

How to apportion or divide your investments up among various classes of investments (cash, stocks, bonds, mutual funds, real estate etcetera) depends on your time horizon, risk-tolerance and your overall goals.

A stock fund will help grow your investments and guard against inflation.

Your asset allocation will depend on a formula you set based on your risk—or you can select target date funds that gradually move you into conservative investments as you age.

If your formula is out of balance you will have to re-allocate or re-balance by selling assets of one class and purchasing assets in another class. 

Or you might choose to keep things as they are and direct your future investments in another class. Your goal when reallocating is to buy low and sell high—thereby increasing your retirement balance and living conditions.

Most of those who save for retirement look at their finances at least annually and may re-balance annually or every two or three years, depending on how far their investments differ from the formula that they had selected.

You can get a real handle on where you are now by going to and selecting the portfolio manager tab!

How Do I Assess the Fees

In the financial industry the standard way of assessing your fees are to look at the “expense ratio” that is often stated in the financial literature.

It is critical that you know this number as it can cost you “thousands” in the future.

While many consumers do comparison shopping on consumer goods that often save them a few dollars a month—many rarely consider the impact of expenses on their retirement earnings.

It is critical that you do not make that mistake!

A range of .1 to .90 is the average range
—but it really depends on your asset class—so the rate varies—be sure to do your research on the front end!

Again, we return to the subject of “total return”—as your total return will be negatively affected by high “annual expense ratios.”

In cases where your managed funds returns are significantly higher than other funds in the same class—paying higher fees may be advantageous to you.

You must know your fees—and your returns—relative the asset class that you have selected.

In addition, you must consider the tax impact on your portfolio—especially if you have high income or a high net worth.

Dividends inside of an IRA are normally tax-free—whereas one in a brokerage account outside of a retirement account would normally be taxable.

Also as you near your retirement age you might want to consider combining accounts (be aware of scammers) so that you can more effectively manage them.

Many companies offer credits or cash bonuses if you move a certain amount of your funds to their company.

By doing so you will reduce paperwork, calculate your withdrawals based on your life expectancy easier, and more accurately calculate your RMD (Required Minimum Distribution) once you turn 70.5 (now age 72)!

You will also be able to slowly (3-4 years before retirement) draw out funds that are needed for your living expenses and put them in a CD or other safe account that provides more liquidity and safety.

It is important that you have the patience that is needed to attain your future goals and you must realize it is normally a long-term process.

There will be ups and downs and times of uncertainty, however you must continue to invest in a consistent manner so that you can attain the goals that you desire—knowing that uncertainty is a part of the equation—but doing what “you can” on your end to reduce that uncertainty as best you can!

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About This Article:


The above article was written by Thomas (TJ) UnderwoodThomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia. 

He is the writer behind The Real Estate & Finance 360 Degrees Series of Books that include The Wealth Increaser, Home Buyer 411 The Smart Guide to Buying Your Home, Home Seller 411 The Smart Guide to Selling Your Home, and  Managing & Improving Your Credit & Finances for this MILLENNIUM.

In addition he is also the writer who created The 3 Step Structured Approach to Managing Your Finances, and CREDIT & FINANCE IMPROVEMENT MADE EASY—NEW GUIDE that you can download right now "(at MIMIMAL cost $3.95)" to learn more about his writing style and how you can achieve "more" success in the current economy.

He is the creator of where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner. 

He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. He was the first financial planner to coin the phrase "financially alert mind"  and he consistently writes in a style that is designed to provide consumers the ability to take control of their lives and achieve great results.

You can contact him from a number of sources but the most direct way is to contact him through the contact us block that can be found at the bottom of this page.  You can also get highly relevant tips on "living your life more abundantly" and link to and possibly earn revenue by logging on to

He is also an IRS registered tax planning professional with over 30 years of tax experience and can be reached at:



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Atlanta, GA 30349

404-952-9284 (Direct)

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