~~Retirement Income Planning
As you approach retirement, the way you think about your finances changes. Rather than focusing on the saving, investment and accumulation of retirement assets, you have an entirely new set of challenges to face. Retirement Income Planning addresses these new challenges.
Retirement Income Planning is a comprehensive process that starts with your retirement goals and expectations. A successful Retirement Income Plan will put you in the best possible position to support those goals and expectations financially during your retirement, minimizing the risk that you will outlive your savings. When it comes to Retirement Income Planning even the most complicated plan starts with some basic questions:
1. When do you plan to retire?
2. What does retirement mean to you?
3. How long will your savings have to last?
These questions though basic are very important. They tell us the retirement lifestyle that your plan will focus on, when the plan will be implemented and how long a period the plan will be designed to cover.
What should you expect when it comes to Retirement Income Planning? First, you’ll estimate the amount of annual income that you will need in retirement, factoring in inflation and accounting for the potential cost of health care and long term care. Then, you’ll estimate the amount of income that you can count on from Social Security. If you are entitled to employer pension benefits, you’ll factor that income in as well. If you are like most people you will have un-met annual income needs. This gap will be filled with your personal retirement savings. In the end your Retirement Income Plan will focus on the best way to use your personal retirement savings to meet your long term income needs.
While there is no such thing as a “one size fits all plan” all plans face the same challenges. What investment or asset allocation strategy will provide the best opportunity to meet your annual income needs while minimizing overall risk? What specific investment and product choices are appropriate for your plan? How much can you withdraw from your savings each year? How does your withdrawal rate relate to the risk that you will outlive your funds? While the basic principles of Retirement Income Planning are straight forward the details are very complicated and unfortunately there is not a tremendous amount of room for error when it comes to establishing an effective retirement income strategy. Get it wrong – and you could outlive your savings. Get it right – and you give yourself the best possible chance of meeting your retirement goals and expectations. So ask questions and start planning now.