Income Over Assets: A Key To A Secure Retirement

Are you feeling confident in your retirement plan, or do you have some doubts? Many people are growing concerned as economic uncertainty and ongoing inflation threaten their nest egg’s ability to support their future needs.

Forget About A ‘Magic Number’

There is an enduring misconception that suggests you must have a specific amount of money saved to retire successfully. The problem with this so-called “magic number” is that it’s based on a one-size-fits-all approach that doesn’t take into account your personal financial situation, risk tolerance or retirement goals.

Instead, focus on creating an income plan that will allow you to replace or exceed the paychecks you were receiving during your working years. Implementing a sustainable income strategy will give you much more confidence and peace of mind than reaching some mythical “magic number.”

Your Income Is Your Lifestyle

Retirees need a monthly income to cover basic living expenses, such as food, housing, utilities and healthcare. But retirement isn’t just about paying the bills. Retirement income also funds people’s leisure activities, allowing them to travel on vacations and continue enjoying their hobbies.

Making regular withdrawals from retirement accounts is one way to get the money you need. However, it’s important to remember that our nest eggs are finite. Retirees risk running out of money if too much is withdrawn too quickly. This risk dramatically increases when market volatility coincides with periodic withdrawals.

Studies have shown that one of the biggest fears of retirees is outliving their money. The right income plan can help you maintain your independence and avoid becoming a financial burden on your loved ones.

Social Security Alone Is Not Enough

One retirement income source that nearly every retiree can consider is Social Security. This government-sponsored program provides monthly payments to retirees who have paid Social Security taxes during their working years.

Retirees should be careful not to become too dependent on this government paycheck, as the future of the program remains unclear. In fact, the Social Security Board of Trustees has reported that the projected reserve depletion date for the combined OASDI trust funds is 2034. At that time, which is less than a decade away, only 80% of the cost of the fund would be payable.

This harsh reality has deepened the need for additional sources of retirement income to supplement any Social Security payments.

How To Establish Your Own Personal Pension

For our parents and grandparents, pensions were the foundation of retirement planning. But today, only about 1 in 10 Americans working in the private sector have access to these defined-benefit plans.

Many people are unaware that you can invest in your own personal pension and generate an income stream that cannot be outlived. Similar to pensions, fixed indexed annuities (FIAs) pay retirees an income for the rest of their lives.

Fixed indexed annuities offer market-like gains, with principal protection. Any money invested is linked to the performance of a stock market index, without being exposed directly to risks in the market. This strategy effectively places a protective floor on a portion of a retiree’s portfolio, allowing them to both protect and grow their hard-earned savings.

When an owner of a fixed indexed annuity is ready to annuitize, they turn on their income and receive periodic payments as long as they live. Some FIAs also offer features like immediate bonuses and spousal benefits.

Building An Income Plan For Your Retirement: Considerations

Here are some steps you can take to help prepare; however, it’s important to understand that there is no one-size-fits-all approach to retirement.

• Considering Your Golden Years: The first thing to consider is how much income you will need during your golden years. Consider your current expenses and anticipate any potential changes as you enter retirement. Don’t forget to account for rising inflation and healthcare expenses as you age.

• Expected Sources Of Income: Identifying your expected sources of income in retirement is very important. This includes calculating your Social Security benefits, pension income and regular personal savings or investment withdrawals. Carefully evaluate the sustainability of each income source to determine if it will reliably cover your needs. If there are any gaps between your projected income and expenses, you can explore additional income-generating strategies.

• Bringing In An Expert: The third action you can take is to consult with a licensed financial advisor who has experience creating personalized income plans for retirees. A financial advisor can assess your current financial situation, measure your level of risk and recommend the most suitable investment options to generate the income you need during retirement.

With a solid income plan in place and the guidance of an experienced financial advisor, you can enjoy a stress-free retirement and focus on the things that matter most to you.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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