When it comes to income in retirement you need a mindset change.

Retirement is here. Now what?

How is your thought process going to change from your working years?

Let’s talk about one of three areas where your thought process needs to change in retirement vs. your working years.

Where is your income going to come from in retirement?

You need to know where your income is going to come from. When you’re working, it’s really simple for most people, as they have a paycheck. Their spouse or partner may also have a paycheck.

Maybe you’ve got a little extra money coming in from somewhere else, but your paycheck is your biggest source of income.

And as long as you don’t spend more than your paycheck, you know you’re in pretty good shape. You’re doing everything right: You’re putting some money away. You’re not going into credit card debt. You’ve done well.

But in retirement that paycheck goes away, or isn’t as big as it used to be. So you need to understand how you’re going to make that up.

The first area you need to replace in retirement is income.

You need to understand how much you spend. I’m not telling you to make a budget. I don’t want you to reduce your spending. I want you to just figure out what you spend. There’s all sorts of ways to do this.

Add up your credit card bills every month. Or look at your mortgage payments for the year. I don’t care if you spend $2,000 a month. I don’t care if you spend $20,000 a month. But you need to have an idea.

After you identify how much you spend, then we can identify where that money is going to come from.

I can put money in any one of my pants pockets. When I walk into a store to buy a cupcake from my favorite bakery, the employee doesn’t care which pocket I take that money out of. She’s just happy to get the $3 for the cupcake.

But to me it matters. What are those pockets in the retirement world? Those pockets are your IRAs, your 401ks, your Roth IRAs, your cash accounts, your brokerage accounts, your stocks.

You have to have a plan for when you’re going to spend out of which pocket. 

And no, this is not a one-size-fits-all approach. It’s unique to how you are set up and where you are financially. So having a spending plan for which dollar is going to come from where is important.

The next thing we look at is your fixed income.

Things like social security: are you married? When should you start social security? When did your spouse start social security?

All sorts of variables come into play and there isn’t a universal right answer. It comes down to what you specifically are trying to achieve.

If you have a pension, God bless you, pensions are wonderful. We don’t see them very often anymore. But how do you maximize that pension for you, your spouse, your partner, or your family?

Pensions, social security, etc, these are things that you can’t take with you when you pass away. So if leaving a legacy is important to you, you have to make some adjustments inside those pensions and those social securities.

So having an idea of how you spend, where you spend it, how much you spend, is the very first thing you have to understand. And once you understand that, then you can go into that second area that we need to look at.

And that second area we’ll talk about in the next video is asset allocation. Yes, even asset allocation is different in your retirement years than it is in your working years.