Your load is secure. How are your finances?
FINANCIAL SECURITY TIPS FROM YOUR FRIENDS AT TBS
By Kini Gainer, VP/Channel Partners, TBS Factoring Service, LLC
With everything owner-operators have to think about just keeping their rigs rolling from day to day, there isn’t a lot of time to think about what happens at the end of the line, when they go 10-24 and retire.
According to research by Randall-Reilly, 62 percent of the current driver population is over 55 years old. Regardless of when those truckers plan to retire, they need to be planning now.
At TBS, we specialize in meeting the short-term cash flow needs of active owner-operators, but because we care deeply about truckers and their families, I wanted to offer some real talk about some of the things they should be doing now, so that they’ll be ready when the time comes.
Retirement planning really boils down to four questions:
- How much are you going to need to live on?
- How much have you saved?
- How much do you owe?
- And, how are you going to make up the difference?
Let’s break that down:
How much will you need? According to the Social Security Administration website, most people will consume the equivalent of roughly 70 percent of their pre-retirement income to maintain their pre-retirement standard of living. Social Security benefits will cover only about 40 percent of that.
How much have you saved? The balance is going to need to come from savings or other retirement income sources (pension, 401k, investments, home equity, residual truck value, etc.)
How much do you owe? This is where a lot of us fall short. The average American has $38,000 in debt, not counting their home mortgage. As hard as it may be to pay that off, it will be a lot harder after retirement. This is one of those tough love situations where there really isn’t any magic answer— especially with health care costs climbing. It is what it is.
How are you going to make up the difference? That’s really what all of this boils down to, right? Again, I wish I had a magic answer here, but there are only three options: cut expenses, liquidate assets, or keep working. The first thing you need to do is add up the value of everything you own (house, truck, personal vehicles, savings, investments, etc.) and subtract any amount you still owe on those assets. The difference is your net worth, or the nest egg you’ll have to fill that income gap in retirement. Divide that by the number of years you think you’ll need to draw on that income after retirement. The average male lifespan in the United States right now is 76 years. The average female lives to 81.
Keep in mind these are only estimates. The bottom line is that you’re going to need to somehow come up with the equivalent of one third of your pre-retirement income every year for the rest of your life or cut back on expenses in ways you may or may not be comfortable with. Exactly how you do that is going to vary with every individual. The easiest way, by far, would be to save it before retirement. The second, and increasingly common option is to keep working as long as your health will allow.
Finally, speaking of health, this is a huge concern for retirees. According to some estimates, Medicare recipients 85 years and older pay 30 percent of their retirement income on health care. Be sure to factor in health care costs and emergency expenditures into your retirement plan.
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• Preparing For The New FMCSA CDL Drug & Alcohol Clearinghouse
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