Retirement Income Planning: Do’s and Dont’s (

In retirement, your primary concern is providing you and your family with the income necessary to live out your years without the overhanging worry that you cannot sustain the lifestyle you enjoy. Not only do you need to plan for retirement, you must ensure the plan itself is going to support you for as long as necessary.

Retirement income planning not only allows you to figure out what you need to do, it also invaluable for understanding what NOT to do. The following are issues and pain points you should try and avoid:

NOT Deciding The Correct Time Horizon – As a soon-to-be retiree, you must take into account the fact that life expectancy is much higher than in previous generations. It is strange to think, but longevity is one of the biggest risks when planning retirement. With advancements in technology, medicine and nutrition, retirement has become a much larger portion of you life’s journey. To compensate for this added time, one needs to consider a much larger time horizon estimate, and plan accordingly.

NOT Factoring in Market Risk – Although stocks may provide the highest long-term returns for investors, as a retiree, keeping your resources in primarily high-risk assets is too much of a gamble when needing to provide income. Spreading wealth into different asset classes is the safest way to guarantee income for life while providing some growth.

NOT Preparing for Inflation – This is the thief in the night that steals returns and shrinks your portfolio. Not factoring inflation will certainly lower return in the long-run. Considering that your income must double every twenty years in order to keep with the average rate of inflation, a long retirement could put stress on your income due to a lack of planning in this area. Furthermore, pension do not usually include cost of living adjustments so either your savings needs to grow or you need to start with enough to cover this ever increasing expense.

After discussing what not to do, lets shift perspective and discuss the important factors that should be on everyone’s retirement “to-do” list:

Develop a Basic Strategy – Decide your plan of action and stick with it. Similar to a well structured business model, you need to organize your goals in a simple and concise manner, allowing for transparency and ease of access, along with a greater ability to change possible issues before they become a problem.

Make use of Retirement Calculators – Although calculators to tend to be simplistic and lack the complexity to factor in all the variables that you may encounter as you move toward retirement, they do give you a basic understanding of the amount you need to save in order to live a comfortable post-work lifestyle.

Research Annuities and Other Sources of Retirement Income- Understand the financial products available to you. Learn about annuities and other forms of retirement income before deciding on where you will be putting your money. A thorough vetting process should allow you to keep from making the common mistakes in retirement planning, which almost always stem from a lack of information.

Find a Trusted Advisor – Having a trusted advisor helping you along in the planning process will give you the resources necessary to make the proper decision about your future income goals. Find someone with the experience necessary to guide you, as well as the knowledge needed to give you a good understanding of all the various financial products that you can take advantage of.  Advisors at Karlan Tucker & Associates have proven to be an invaluable resource, so if you are interested in hearing how they can help, contact them today.


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