One of the biggest questions on the minds of soon-to-be retirees is, “Will I have enough money to live on when I retire?” Leaving the workforce and finally gaining back all your time for rest and relaxation is an exciting prospect, but being unsure about where your money will come from and what you will live off of can quickly turn a blessing into a nightmare.
Whether you’ve been saving for retirement for years or you’ve only recently started, the uncertainty around whether or not you will have enough money to sustain you throughout the rest of your life can be truly terrifying, causing some people to delay retirement for longer than they’d like or to keep working well into their elderly years just to have the certainty of a regular income.
But according to the financial experts of Kiplinger Advisor Collective, taking the time to craft a plan for your retirement income can help ease — or even eliminate — those fears. Here, they each share their top piece of advice for creating a retirement income strategy that works and explain how having a well-thought-out plan will help give you peace of mind.
Understand and identify your essential and lifestyle expenses
“Understand what you will need to maintain your lifestyle. I encourage individuals and couples alike to identify their core (essential) expenses and their lifestyle (variable) expenses. The language we use is very important. I don't say ‘discretionary’ because what is discretionary to one person is essential to another. Next, confirm your sources of lifetime income to cover those core or essential expenses.” — Marguerita Cheng, Blue Ocean Global Wealth
Diversify your income sources
“Create multiple streams of income. Create a tiered time frame that includes the various places you’ll be drawing income from. Diversification reduces the risk of outliving your savings and provides stability against market fluctuations, giving retirees peace of mind and financial security throughout retirement.” — Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management
Design a drawdown plan
“So many people do not have a drawdown plan! You accumulate, but what are you doing to re-create your paycheck in retirement from your nest egg? It is vital to have a diversified retirement portfolio. Just like you have a diversified portfolio when accumulating, your funds need to be in different types of investment vehicles in retirement, as they each solve for a different risk.” — Shawn Maloney, Retire Wise, LLC
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Focus on having income- and growth-oriented investments
“Many retirees underestimate the need for portfolio growth in retirement, given longer life expectancies. Consequently, retirees should have income- and growth-oriented investments in retirement. Peace of mind in retirement comes from having an emergency fund that will cushion against unanticipated expenses, and a budget that is flexible enough to be tightened when challenges arise.” — Daniel Kern, Nixon Peabody Trust Company
Prioritize generating passive income
“I would recommend prioritizing passive income. You can start by adding to your asset portfolio through real estate investing, for example. Rental homes, mobile home parks, apartment complexes or even industrial real estate can create passive income. The key thing is to invest in the assets that can maintain or appreciate in value over time.” — Justin Donald, Lifestyle Investor
Take your health care costs into account
“One mistake people often make is underestimating the cost of health care in retirement. Make sure you pay attention to income-related monthly adjustment amounts (IRMAA) on Part B and D of Medicare. Also, make sure you properly consider the out-of-pocket costs associated with Traditional Medicare and choose to mitigate that risk with either a Medigap plan or a Medicare Advantage policy.” — Justin Brock, Bobby Brock Insurance
Create a comprehensive income, tax and liquidity strategy
“Start by looking at your expenses and then deploying asset strategies that provide this amount of income on a guaranteed basis. The rest of the assets can be used for more discretionary spending. Consider taxes now and at death. Use guaranteed growth assets to provide liquidity in a down market.” — Ronald Gestiehr, Lifetime Financial Growth
Be ready to adapt over time
“Understand that even if you wait until 70 to retire, there is a good possibility you could live another 20-plus years if you are in good health and taking care of yourself. A retirement income strategy is not a one-and-done plan. A one-and-done plan is a snapshot in time; an income retirement strategy is an ongoing process that needs to adapt to lifestyle, economic and environmental changes.” — Deborah W. Ellis, Ellis Wealth Planning
Seek out expert guidance
“Even if you’re handy with home repair, you probably wouldn’t do a total kitchen renovation by yourself. The same thing goes for building a solid retirement income strategy. This isn’t simply investing in the market. You must balance principal preservation, guaranteed income and growth potential to ward off inflation. You need an expert who does this for a living so you can live the life you want.” — Howard Dvorkin, Debt.com
