Retirement Income – Do I Have Enough?
When I work through retirement readiness with clients, one of the top questions I hear is, “where will my retirement income come from?” Which certainly makes sense, as sustainable retirement income is the key to your successful retirement. The plan for coordinating all your retirement income sources is very dependent on your own individual situation and it’s important to have an advisor guide you through this. I am going to break down some considerations we think about when planning someone’s retirement income.
Retirement income planning starts with your lifestyle. What income amount do you need to support the retirement life you want to live? What is most important to you at this time and how may this change? It’s important to get a good understanding of what retirement looks like for you and your family as this ultimately translates to your retirement plan. For example, if you plan to travel often, we want to make sure that your plan can support this. If you plan to move to a state tax-free state, this may free up more cash flow later down the road.These are all things we consider.
Break your income down into guaranteed and non-guaranteed buckets.Two common guaranteed income sources are social security and pensions. These are a great protection against longevity, as they pay a set amount per month, or per year, for your life. Often, they can protect against your spouse’s longevity as well. Social security offers a survivors benefit where the surviving spouse can receive the highest benefit possible. And many pensions have a spousal benefit election. In addition, annuities can provide guaranteed income sources as well. These are ideal for retirement income planning as they are a consistent source of income that can be counted on.
Non-guaranteed income could be from the following:
- Income generated from your investment accounts
- Retirement account withdrawals
- Required minimum distributions
- Rental income
- Part-time income
These are great sources of income, but as the name insinuates, are not guaranteed and they need to be treated accordingly. If guaranteed income isn’t enough to cover your full expense amount, coordinating your non-guaranteed sources is how we can help, as it’s important to make sure your total income scenario is sustainable, tax-efficient, and supporting you and your family up for the lifestyle you are accustomed to.
Retirement planning isn’t one and done. I often hear clients assume that immediately upon retirement, their investment accounts need to be 100% conservative. Or, once they have a good income plan, they are all set and don’t need to look at it again. This is not always the case, as remember that your retirement can be many years, and as I see it so often, goals change during retirement. You want to make sure you are accounting for your expenses increasing (inflation, increased healthcare costs, long-term care, etc.), changes to your goals such as wanting to gift more to kids or grandkids, and making sure there is a buffer with your non-guaranteed income sources to account for these changes. Retirement planning is an on-going process that supports and guide you during these changes.
Kelsey Ponesse, CPA
Wealth Planning Advisor
845-554-1046, ext. 2353
kponesse@ms-wealth.com
If you have questions, concerns, or want a second opinion regarding your retirement income planning, we are here to help. Please reach out to me at any time. Kelsey is a CPA and Wealth Planning Advisor with more than a decade of combined experience. Kelsey has extensive knowledge of and experience in the areas of financial planning and tax efficient investing. She helps her clients gain insight into their desired financial future, then works to craft a plan to help realize that vision.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Marshall & Sterling Wealth Advisors, a Registered Investment Advisor. Marshall & Sterling Wealth Advisors and Marshall & Sterling Wealth Management are separate entities from LPL financial.
Fixed Annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawals. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. All investment principles involve risk including the loss of principle.