3 Keys To A Successful Retirement Income Plan
We're SUPER excited to announce the roll-out of our newly trademarked "RichLife Retirement Success Strategy™"
This has been the missing KEY to addressing, integrating and simplifying the six critical components we believe every successful retirement plan needs to include!
Let's take a quick look at the first key to planning a successful retirement, your retirement income plan.
3 Keys To A Successful Retirement Income Plan
The lifeblood of retirement is income. Will you have enough? Will it last as long as you do? These are the top concerns of the soon-to-be retirees we work with every day.
And, the first key to income planning is to define your "income gap."
What Is An Income Gap?
An income gap is the difference between what you have and what you need.
To fill this gap, you use part-time wages, your retirement savings, rental income, or your Social Security benefit.
The reality is, most people do not know what their income gap is, which leads to a whole host of efficiency problems during retirement.
The first step to identifying your income gap is to figure out how much your estimated expenses in retirement will be. Then, you need to identify the sources of retirement income available in your specific situation. The difference between the income and expenses will be the income gap.
Once you've identified your income gap, the next key to income planning is maximizing your Social Security benefit.
Maximizing Your Social Security Benefit
A report published last year says that 92% of retirees claim at a less than “optimal” time --- meaning they are losing an average of $111,000 in lifetime benefits per household.
For the majority of retirees, Social Security represents at least 40% of their retirement income. With fewer pensions and less savings as a country, getting every penny you can from your Social Security benefit is more critical than ever.
Unfortunately, this crucial aspect of retirement planning is often neglected by financial advisors who don't model retirement plans based on optimizing Social Security income (which happens to be one of the most important retirement income tools available to a retiree). And, it's because they aren't trained, educated or paid to do so.
You need to test project and model several different retirement scenarios to discover what the optimal claiming strategy is for you and your specific circumstances BEFORE you claim your Social Security benefit.
Once you've identified how to maximize your Social Security benefit, you need to give careful consideration to which accounts you draw from first for your retirement income.
Order Matters
And, by "Order Matters" I mean that we need to have a plan and a strategy model in place to determine which income assets you draw from first.
Do you use your pre-tax assets first? Do you use your after-tax assets first? Do you start Social Security early? Do you defer claiming your Social Security benefits?
There is no one-size fits all answer to any of those questions. The answer is different for each retiree because each household has different variables that need to be taken into consideration.
And, the order that you draw down your assets can have a profound effect - to the tune of hundreds of thousands of dollars - on how much money you will actually have to spend and use if not done in the most efficient way possible.
The only way to determine the best order for your income distribution strategy is to have several different options modeled to see how they will play out over time. This way you can see how long your income will last in retirement and how you can achieve your retirement income goals. When you model these scenarios for your specific situation The Math Will Show The Path to maximizing portfolio longevity and tax efficiency in your retirement income plan.
Once the income plan is in place we still have to figure out how to deal with inflation and maximize long-term growth.
In our next newsletter, we'll talk about Growth Planning - the second key in our RichLife Retirement Success Strategy™