Retirement Income Planning 101


Retirement Income Planning 101

When it comes to retirement and retirement income, you probably know that saving for it as early as possible is essential. This way, you can tap into the power of compound interest and build a healthy nest egg for your future.

You may also know that delaying retirement is often a good option, especially if you’re in reasonably good health and want to ensure your savings last as long as you do. What you may not have thought of, however, is your income needs in retirement. With these tips, you can start to shift your thoughts from saving for retirement to living during it.

Focus on Income

While you may want to try to save $1 million by age 65, it’s just as important to think about your income. Ask yourself what your monthly expenses will be and whether you’ll be able to cover them. Also, consider if you plan to downsize, travel frequently, or treat your loved ones to lavish gifts. All of these things can significantly impact your income.

Modify Your Retirement Income Withdrawals as Needed

There’s a good chance your retirement income needs will change over time. For this reason, you’ll want to take a close look at your withdrawal rate at least once a year. This way, you can ensure you take out the right amount of money at all times. For example, you may realize that your initial withdrawal rate may be too high or too low a few years into retirement.

Consider How Your Health Will Affect Social Security

Contrary to popular belief, it’s not always wise to delay Social Security benefits. Your health, marital status, and financial situation can help you determine whether or not you should claim Social Security as soon as possible or delay it. You may find that taking Social Security sooner rather than later is the way to go.

Keep Taxes in Mind

Every retirement account comes with its own unique tax rules. Therefore, you should understand how your withdrawals will affect your tax bracket. You may also want to prioritize withdrawals for your required minimum distributions. Also, consider a Roth IRA conversion as it can spread out when and how much you are taxed.

Consider an Annuity

For retirees seeking retirement income and safety, fixed-indexed annuities are an alternative to consider. Annuities are backed by the claims-paying ability of the insurance company issuing them. Annuities protect during market decreases; withdraw from the annuity to avoid liquidating other accounts at low share prices. The advantages of a fixed-income annuity include:

  • A guaranteed stream of lifetime income now or in the future.
  • The insurance company guarantees the payments.
  • You won’t outlive the payments.

Ladder Your Withdrawal schedule

When you ladder your investments’ withdrawals, you stagger your fixed-income vehicles’ maturity dates like CDs and bonds. You can also ladder withdrawals from tax-sheltered investments, such as fixed-income annuities or others. Remember to be aware of Required Minimum Distribution (RMD) schedules for assets that have RMD requirements.

If you choose to ladder your withdrawal schedules, you could generate more retirement income by leaving investments that may produce a higher return rate until last to liquidate. If you believe your retirement will last for 20 years or more, having multiple investment vehicles with differing withdrawal dates can help stretch your retirement income. Annuities can be structured to provide income for your life and that of a spouse if applicable.


SWG1516567-0221c The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be speci?c ?nancial or tax guidance. An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Consult a tax advisor for specific information.

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In addition, Behn Financial Group specializes in providing strategies and guidance for those who are seeking a better lifestyle in retirement. If you have retirement savings of five million dollars or $50,000, we can ensure it works as hard. As a result, we offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!