Do You Have an Income Plan for Retirement?

Jeff Martin is a financial advisor at Cornerstone based in Reno, NV. Jeff has earned the Life and Health Insurance Licensure and has passed the Series 65 examination. He enjoys being able to help clients create customized strategies for their portfolios based on their unique financial goals.

DO YOU HAVE AN INCOME PLAN FOR RETIREMENT?

Many people think that when they retire, it also means they stop making money, but this isn't the case for a successful retirement. A critical factor in a successful retirement is having enough stable and predictable income to cover your expenses year after year. When planning for your retirement, you should make sure to have a comprehensive plan in place that focuses on all aspects of retirement, including income. 

You’ve probably heard the saying: “By failing to plan, you are planning to fail,” and when it comes to income planning in retirement, that saying is true.

Income is the bedrock of retirement planning, without it, you either stay working, or go back to work. Given this, you can begin to understand the importance of developing a well thought income plan. Today we will address an overview of what you should consider when creating your monthly income plan for retirement.

WHAT FACTORS AFFECT A RETIREMENT INCOME PLAN?

Income planning is not much more than asking yourself a few questions, including:

1. What do you need?

2. What income do you have coming in?

3. If there’s a shortfall, how do you make up the difference?

These questions are used to guide you through planning your income. They should help you recognize your normal spending habits and pair that with the amount of money coming in monthly. It also helps you create a failsafe with your financial advisor if your funds fall short.

So, what are some key factors you need to consider? The following are some elements to think about when curating your income plan.

1. LIFESTYLE

When asking yourself these questions, you’ll also need to consider your lifestyle. By not factoring in your lifestyle, you may find that your monthly spending doesn’t match your predicted budget. Which can lead to problems such as running out of money. With the help of your financial advisor, you can also include inflation to your budget.

2. RETIREMENT FUND SOURCE

More often than not, a typical income plan may consist of Social Security with supplemental retirement savings. Of course, there are situations where a pension may be included, rental property, part-time work, etc. Any additional income simply reduces the necessary amount to draw on retirement savings.

3. WITHDRAWAL RATE

The withdrawal rate (an annual withdrawal percentage you take from your assets) provides a lot of clarity on if your “plan” is sustainable or not. The vast majority of studies recommend targeting a 3-4% withdrawal rate pending your age and a few other circumstances. Exceeding a 3-4% withdrawal rate, increases the likelihood of running out of assets.

While it can absolutely be considered a litmus test, it is not etched in stone. For instance, if an individual exceeds the withdrawal rate for a period of time, awaiting additional income to begin (i.e. Social Security), at which point the withdrawal rate is decreased and/or stopped, can be a viable option in many situations.

4. PURPOSE OF YOUR INCOME PLAN

To get an understanding of the sustainability of the assets, it comes to the specifics of what one wishes to utilize their plan for. Generally, it’s recommended to have your “needs” met with guaranteed income sources. Then pending the situation/ individual preferences, the “wants” portion of the budget could be met through non-guaranteed income sources that will fluctuate. Other situations, folks prefer to have the entirety of the monthly budget (needs and wants) be met with secure income sources.

INCOME PLAN OVERVIEW

The points previously mentioned hopefully help highlight some components of an income plan that should be considered before just “jumping and hope it works out.” In essence an income plan should be approached by the following steps:

1. Identify if your withdrawal rate is sustainable.

2. Determine your preferences based on your situation.

3. Consider how much of the portfolio is needed to create an income.

4. Utilize any remaining assets for long term growth or reserving assets.

Talking with your advisor is a great way to create a well-executed plan. The financial advisors at Cornerstone Comprehensive Wealth Management can help you create a well-maintained retirement income plan. Through our advisors’ years in the finance industry, they have learned a few tricks to save you money and time, so you can really enjoy your retirement.

Using the Cornerstone Retirement Income Analysis, we will show you strategies designed to maximize your retirement income, conservatively generate returns to beat inflation, and create tax efficiencies in your retirement. To create your comprehensive retirement income plan, contact Cornerstone today to see how we could help you.

---

Based in Reno, NV, Cornerstone is for individuals and families looking to grow wealth, protect and preserve their life savings, and plan for the distribution of their estate in a tax-efficient manner through a tailored strategy. Schedule a time to discuss your financial goals with us.