In general, a lot of people are scared of the hard truths surrounding their money. It’s a bit surprising that more people aren’t interested in learning about their financial future. Understanding your finances in the present is one of the only ways of seeing into the future, and if you don’t like what you see, you can make active changes with noticeable and satisfying effects. For most clients, getting started is the hardest part, as it can indicate how financially literate and responsible they have or have not been. Luckily, learning financial future is simple when you ask these four questions:

What rate of return do you have to earn on your savings and investment dollars to be able to retire at your current standard of living and have you money last through your life expectancy?

Otherwise known as ROI (return on investment), this number is generally calculated as a percentage and gives clients an understanding of the gain or loss in relation to the original investment.

How much do you need to save on a monthly or annual basis to be able to retire at your current standard of living and your money last till life expectancy?

In general, most people should save 10 to 15% of their income for retirement. However, due to personal circumstances, some may be able to save more and others may only be able to save a small amount. A client should save as much as they can, and figuring out these questions should show exactly how much that is.

Doing what you are currently doing, how long will you have to work to be able to retire and live your current lifestyle till expectancy?

Life expectancy can be difficult for clients to nail down. No one likes to think about how long they might or might not live, but it is a crucial part of retirement planning. Knowing when to retire based on life expectancy can help a client understand how much money they need to put aside to have the kind of life they want after they stop working.

If you don’t do anything different than you are doing today, how much will you have to reduce your standard of living at retirement for your money to last to your life expectancy?

This question and what it means to a client can vary drastically. For example, if a client has done little retirement saving, it most likely means that retirement may be an uphill battle. They will have to start saving immediately and may not be able to retire as early as they’d like to. Perhaps this client will have to continue some work after retiring. However, if a client has already put a large chunk of money into their retirement, it can help determine how financially free they are to do the things they’ve always wanted to do.

All of these questions center around life expectancy, and for good reason. Money runs out if not properly managed. Understanding how a client wants to live after retirement versus how much money they are spending and saving can show them how they need to manage their money and what they need to begin doing to have the life they want.

Chris Jacob is a Registered Representative with Saxony Securities, Inc.. Securities offered through Saxony Securities Inc.
(SSI)..Member FINRA, SIPC . Non-security products and services or tax services are not offered through SSI. Cadeau is not
affiliated with SSI.