Retirement Income Planning

Where Will Your Retirement Income Come From?

It would be nice if paychecks continued for our entire lives, but they don’t. Understanding your expenses in retirement and making wise choices on using your retirement accounts can help you create the retirement lifestyle you want. Click on the video below to hear Josh discuss the importance of retirement income planning.

Video Transcript

As my kids have gotten older, we have recently introduced allowances into their lives. On our fridge they have a chart of their chores they have to do throughout the week. There’s little magnets, and if they put all the magnets up, they get their allowance. To them, this is a big deal. They get a dollar and, you know, this is a life changing event.

Now to think my kids are five and seven and at that point in their life, this is when they start to realize that people work for an income and it doesn’t really change. Hopefully as they get older as teenagers they’ll have jobs, and they’ll eventually join the working world out there. And for the next 30, 40, 50, 60 years of their life, they will be working to bring in some sort of income.

But when you retire, it’s a major life switch that is probably even bigger of a mindset shift then when you go in to get your first job. And that is you are reliant on somebody else for your income. So understanding where your income is going to come from in retirement is extremely important. And there are three big sources for most people.

The first is social security of some type. How you maximize social security is extremely important, how it ties into your personal situation. That is going to be a fixed income that you’re going to have for the rest of your life. And I encourage you to learn as much as you can about maximizing the social security for your specific situation.

And the second is something that less and less people have, and that’s a pension. And if you do have a pension of some sort first off, good for you. But second off again, you have to figure out how you’re going to maximize that for you as well as for your family.

 But other than pension and social security, there’s not too much other guaranteed income that comes in the door. So that means everything else, if you need more money on a monthly or a regular basis, you’re going to have to rely on other sources. And hopefully for most people that’s money that you’ve saved or acquired over your lifetime.

And those may be in 401ks and IRAs. So you have to have an asset spend down strategy. An asset spend down strategy I like to tell people is if you’ve got four different pockets on your pants and you’ve got money in each pocket, you need to understand that you can pull money out of any one of those pockets.

But which pocket you take money out of is going to impact how long your money lasts. So having a plan to say, ” Hey, I’m going to take it out of pocket one for this first few years and pocket two for the next few years and pocket four…that’s for longterm and emergencies, if I ever need it.” But having that mindset is extremely important.

Now, to shift that one step further, there are other ways to guarantee some income. If you would desire more guaranteed income than social security offers or more than social security and pension offers, there are ways to do that with your investments. And when I’m talking about guaranteed income, I’m talking about contractually guaranteed income.

I don’t want anything market-based if that’s the scenario that’s there. The common mindset that goes in is, people want their fixed expenses to match their fixed income. So if you spend four thousand dollars a month no matter what, you want to have your income be four thousand dollars a month, no matter what. Other things that are not fixed can be part of that fun money that you might have come out there.

So understanding how you want that fixed income to come into play is extremely important. And the last thing I encourage everybody to have this, is a written income plan. You want your financial advisor to provide to you a breakdown of which accounts they plan on taking money from for you in the future.

And it’s extremely important in the next one to two years, so the next one to two years should be extremely detailed. And then maybe in the next three to five years after that could be moderately detailed. If they want to be obscure, they can make it for the longer term stuff, but make sure that something they provide to you.

And it’s something they update on a regular basis because we understand plans change, but it’s your retirement, it’s your life. Make sure that you know where your money is supposed to come from on a month by month or year by year basis. Cause remember income and retirement is different than when you have those paychecks your entire life coming in the door.

I hope you got some value out of the video we just shared with you. And if you know somebody else that could find value in this, please feel free to share it with them. If you yourself would like to talk further about this, please use the link below to book a 15 minute phone call with our office. Thanks.