Retirement Income Planning

A key part of planning for a successful retirement is maximizing your retirement income and ensuring it will be available throughout the remainder of your life. This is known as Retirement Income Planning.

For most people, retirement is the inflection point at which you go from an accumulation of assets during your working career to a drawdown of those assets throughout your post-working years.

This drawdown of assets should be carefully planned to maximize its longevity and reduce taxes and downside risk. To create an ideal retirement income plan according to your unique situation, we review all of your assets and potential sources of income, discuss your income needs and goals, and determine a plan for drawing down those assets over time in a way that avoids unnecessary risk and tax liability. 

Common Retirement Income Planning Mistakes

In helping clients over the past 20 years to build successful retirement income plans, we’ve come across many common mistakes. Here are the top 5.

1. Not Having a Formal, Written Retirement Plan

As the old adage goes, if you fail to plan, you have planned to fail. Many future retirees will spend more time planning their next vacation than they will on planning for their retirement. It is essential for every individual or couple approaching retirement, to develop a plan including but not limited to the following:

  1. When are you expecting to retire?
  2. What are your retirement goals?
  3. What is a reasonable amount of money to retire with, for you and your retirement goals?
  4. How long do you think your retirement will last?
  5. What will your estimated living expenses be at retirement?
  6. What will your estimated living expenses be 10 years into retirement? 20 years into retirement?
  7. Where will the money come from?

Through this process you will arrive at the responses that will begin to lay the foundation for what will hopefully be a long and prosperous retirement.

2. Not Being Strategic About Social Security

It is extremely important to fully understand the myriad of claiming options available to you and your spouse. Some of the most common mistakes made as a result of not being aware of these options would be:

  1. Filing earlier than necessary
  2. Not coordinating benefits with a spouse
  3. Forgetting to factor in survivor benefits

Properly optimizing Social Security benefits could possibly save a typical individual and/or their spouse many thousands of dollars over the duration of their retirement.

3. Retiring Too Early

Almost everyone, at some point, has dreamed of retiring early and spending the rest of their time as they see fit. Unfortunately the reality of early retirement, for most people, remains just that, a dream.

Early retirement requires a substantial nest egg that most people simply do not have. An early retirement, combined with continued increases in life expectancy, may put most retirees at greater risk of running out of funds. Most people would be surprised if they saw the amount of increase in retirement independence working only a few extra years could provide.

This additional independence, associated with retiring at the traditional retirement age, would stem from a reduction of your retirement duration, an increase in Social Security and other defined income streams, and a potential increase in the amount of financial assets that could accrue.

If, however, early retirement is still a goal that you would like to realize, It would be absolutely critical to create a Retirement Income Plan that addresses the additional funding necessary to cover the longer duration of your retirement.

4. Not Having a Plan to Address Potential Healthcare & Long Term Care Expenses

This is an area that is often overlooked in the retirement planning process. It is quite common for retirees to assume that Medicare will cover every expense, but that is simply not the case. Ignoring these potential future expenses and not developing a contingency plan to pay for them could derail a retirement plan and leave you and/or your spouse financially vulnerable in your later years.

5. Not Adjusting the Level of Risk in Your Retirement Portfolio

As people approach retirement, they will start to transition from the asset accumulation phase to the distribution phase. Your time frame gets shorter in the distribution phase, and it is highly likely you will need to start taking income and distributions from your retirement accounts.

Your new time frame and portfolio income needs will potentially demand a lower portfolio risk level that should increase the odds of maintaining a relatively stable account balance. A stable account balance with some growth will allow a retiree to potentially use their assets for the entire length of their retirement.

Frequently Asked Questions About Retirement Income Planning

Looking for a Retirement Income Planner you can trust?

We serve clients in person in the Boston metro area and virtually throughout the United States.

If you need retirement income planning help and want to speak with a trusted financial advisor, please Contact us. We’ll coordinate a meeting to see if we’re good fit in helping you build a retirement income plan that matches your unique needs and goals.

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