The Basics of Creating a Plan For Taking Income in Retirement
Curtis has earned the Life and Health Insurance licensure, has passed the Series 66 examination, and has earned a degree from the University of Nevada, Reno. He has over 20 years of experience in the financial industry, helping others protect, grow and manage their wealth. Curtis helps clients create customized strategies for their portfolios based on their unique financial goals.
THE BASICS OF CREATING A PLAN FOR TAKING INCOME IN RETIREMENT
Planning your retirement can be stressful. And ensuring that you have an income during your retirement can be another factor that can seem overwhelming. So, what are some of the basics of creating a plan for taking income in retirement? Here’s an overview of what you should expect when talking with a Financial Advisor about your retirement income.
One of the most important things is how your accounts are positioned to take in income. We have previously discussed the different buckets of money in retirement and the types of accounts. But that raises the question of the sequential order of how we take our money out of our accounts. Let's talk about the three main variables we would look at in creating an income plan for retirement.
WHAT ACCOUNTS DO YOU HOLD?
First, what type of accounts do you hold? Is everything in a Pre-Tax IRA, 401k or another retirement plan? Do you have Non-Taxable assets such as Roth? What about any Non-Qualified investments subject to Capital Gains and Capital Loss? When you look at your buckets of money, you have to understand the taxation of the account. Once you know how each account is taxed, it is time to figure out where to start taking the money from. Taxes can be a hindrance to your retirement income, so discussing your account options with your financial advisor can be beneficial.
2. WHAT TYPES OF INCOME DO YOU HAVE?
Next, we want to look at what other types of income are coming in for your retirement. Do you have the old three-legged stool of pension, social security, and retirement savings? The old three-legged stool is rare today, but it is what the post-WWII era retirees depended on. This retirement method changed when many companies moved from a defined benefit plan (pension) to a defined contribution plan (401k etc.) In turn, many have Social Security but no pension, or vice versa. These numbers create our foundation for income in retirement, and how we distribute assets from the various investments is the key to understanding our taxable liabilities.
3. HOW HAVE YOU INVESTED YOUR MONEY?
Finally, you want to look at how you're invested. Are you taking income out of a Growth portfolio where you can lose 35%-50% (depending on a market correction)? What tools are your investments in, and what happens when you take income from them? Do you have an emergency savings account so you do not throw off your income plan for retirement? Where you have placed your money is a major component of how you can receive income during your retirement.
As you can see, there are three main areas to focus on when creating an income plan for retirement. First, the tax status of the account. Second, analyze your income sources in retirement. Lastly, how are you invested, and what investments are you taking the income from? These three factors are why it is essential to have an income plan in place where your investments support your income and you have a tax strategy that ensures you are as tax efficient as possible. Your retirement income is something that you should be discussing regularly with your Financial Advisors and your CPA, as this is the foundation of any financial plan in retirement.
To help you create a well-thought-out retirement plan, you can use the Cornerstone Retirement Road Map. This will show you strategies designed to optimize your retirement income and provide the life you want to live. If you’re interested in using the Cornerstone Retirement Road Map to take the fear out of your financial future, then you should contact us today.
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.