Planning for Income in Retirement
Making retirement income last a lifetime

When people retire, they move from a period of asset accumulation to one of asset distribution. While it was imperative to have a financial plan to accumulate assets, in retirement people need an intelligent, retirement income plan to make those hard-earned assets last the rest of their lives.

The emphasis shifts from savings and accumulations to managing the “nest egg.” An income planning strategy is required, and it can be intimidating!

Following are a couple of key retirement income planning issues:

• Longer retirements must emphasize the need for a growing income stream that keep pace with inflation.
• Investment portfolio’s must protect the principal from inflation and market volatility.

With proper analysis, and reliable advice, it all comes down to a single calculation. How many dollars of the investment portfolio can be safely liquidated each year to provide an income in retirement?

Numerous tools exist to assist with this process. Sophisticated financial tools like “Historical Analysis,” and “Monte Carlo Simulations” can determine a precise number – if one has perfect knowledge of the future, investment returns, inflation rates and one’s longevity. Too often retirement income planning merely consists of an educated guess!

A thoughtful process, however, will lead to better recommendations, decisions, and perhaps, more prosperous retirements for retirees, all of whom will have to live with the uncertainties of the future.

Factors that determine successful retiree income planning

• Income distribution success may be determined by:
• Luck.
• Individual asset or security selection.
• Asset allocation (how you divvy up your assets among stocks, bonds, and cash).
• Management of costs.
• What are some of the key risks of a sound retirement income plan?
• Available pool of wealth to produce an income.
• Investment choices: stocks, bonds, cash, real estate, etc.
• The possibility of outliving your accumulated wealth.
• Catastrophic economic and health care events that dissipate your wealth.
• Life Annuities for beyond normal life expectancy longevity.
• Long-term care insurance portfolio protection against catastrophic costs.
• Bear market volatility portfolio strategies.
• Inflation protection securities and portfolio design.
• Understanding required minimum distributions.
• Setting sustainable withdrawal rates.
• Transitioning from accumulation to depletion.
• Balancing income, growth, and savings.
• Wealth preservation while also creating income from illiquid assets.
• Items that often require the expertise of a financial planner or wealth manager
• IRAs and pensions.
• Social security.
• Roth IRAs.
• Tax-free bonds.
• Regular dividends and interest.
• Qualifying domestic dividends.
• Immediate annuities and deferred annuities.
• Cash value settlement options.
• Reverse mortgages.

Retirement Asset Allocation
For many people planning for retirement, asset allocation is a crucial issue. How much should go into stocks, bonds and cash? Like so many questions, the answer depends on a number of factors and choices. Click now to download an example of a “Functional Allocation of Retirement Funds and Cash Flow Needs." Click here to view pdf.

Practical retirement planning: a case study
Click here to download an insightful case study titled, “Yours, Mine and Ours: An Income Planning Case Study.”