Retirement is something that we all dream of experiencing one day. It’s the reward for decades of dedication and hard work. Whether you are nearing retirement in the next few years or are recently retired, you should start planning for it now – it is never too late. Rising longevity means your retirement could last 30 or more years.
As Benjamin Franklin once said, “Failing to plan is planning to fail.” When it comes to your retirement, this should be a major concern. The decisions you make today will have a major impact on your tomorrow.
Navigating today’s complex, rapidly changing financial world is daunting enough, let alone trying to create a retirement income plan that will sustain you through decades of retirement retirement. You can’t afford to make mistakes, which could have dire consequences later in life.
If you’re feeling overwhelmed and wondering if your retirement income will sustain you throughout your retirement years, it may be time to consider connecting with a team of Roseville retirement planners who can provide you with the experienced guidance you need to make the right decisions.
Navigating today’s financial world is daunting enough, let alone trying to create a retirement income plan that allows you to maintain your standard of living during your retirement years.
Understanding the Importance of a Financial Roadmap
Using the analogy of taking a road trip across the country, you have a destination and would rely on the directions in your roadmap to reach your destination. Similarly, you should have a financial roadmap to help you navigate the various phases of your retirement journey.
That’s why at Bulman Wealth Group, we created what we call the Financial Compass. It’s a distinct approach to simplifying the retirement planning process. The Financial Compass focuses on five key areas: income, investment, taxation, healthcare, and planning for your legacy.
This strategic plan is not just about numbers; it reflects your life’s work, beliefs, dreams, and the legacy you wish to leave behind.
Income Planning: The Foundation of a Sound Retirement Plan
Retirement income and expense planning in Roseville is crucial to the success of your retirement later in life. It involves strategizing how to manage and allocate your retirement income to cover your living expenses for decades.
By comparing your anticipated monthly or annual expenses with your expected retirement income, you can identify potential shortfalls and make necessary adjustments, such as increasing savings or adjusting your investment strategy for more growth and/or income.
First, you should identify the various retirement income sources you anticipate receiving. Here are some of the more common examples of sources for retirement income:
- Social Security benefits
- Company-sponsored pension plans
- Company-sponsored 401k plans
- Traditional and Roth IRA
- Personal savings accounts (taxable)
- Income-producing real estate
- Part-time employment
- Annuities
Next, you should develop a retirement budget and an expense plan to ensure your retirement income can cover all your costs, including a rainy day fund. For instance:
- Calculate monthly mortgage or rent expenses, electricity, water, and other utilities
- Estimating monthly medical expenses, including insurance premiums, out-of-pocket costs, and prescriptions
- Budget for groceries, transportation, and other day-to-day expenses
- Allocate funds for hobbies, entertainment, and travel to enjoy retirement life
- Create a reserve for unexpected expenses
Listen to our podcast: “Wealth Preservation vs. Income Generation in Retirement- Much Cash Should I Have?
Retirement Income Strategies
One thing is certain: everyone’s financial journey is different, so having a customized retirement plan that is unique to you is the first step toward pursuing a comfortable retirement.
A Roseville financial advisor can help you develop and implement various retirement income strategies to extend your savings throughout your retirement years. These strategies should align with your risk tolerance and time horizons while focusing on tax efficiency.
Here are a few of the more common retirement income strategies that may be appropriate for your situation:
- Deciding when to start claiming Social Security benefits is an important decision. For example, delaying benefits beyond the full retirement age (67 if you were born in 1960 or later) will increase future benefits, which reduces the need to take distributions from other sources of income. This strategy can extend your sources of retirement income.
- Asset location strategies look at your assets’ strategic placement across taxable and tax-advantaged accounts for optimal after-tax efficiencies.
For example, stocks that benefit from lower long-term capital gains tax rates might be included in taxable accounts, while bonds might be better suited for tax-deferred accounts.
- Managing your Required Minimum Distributions (RMDs) from tax-deferred accounts, such as 401(k)s or traditional IRAs, is another critical piece to your retirement income planning process. You want to avoid pushing yourself into a higher tax bracket based on the amount of RMDs you must take each year after retirement.
Strategies may also include starting withdrawals before they’re required or converting traditional IRA funds to a Roth IRA.
Watch our new video: Uncovering Retirees’ most common financial mistakes.
- A retirement withdrawal strategy should also be included in your overall retirement plan. This determines the order and accounts you will withdraw from to cover your living expenses. Each strategy has its potential advantages, and the best approach depends on your financial situation, risk tolerance, and retirement goals:
- 4% Rule: This strategy suggests withdrawing 4% of your retirement savings in the first year of retirement, then adjusting the amount each subsequent year for inflation. This approach is designed to balance the need for income to preserve the purchasing power of your savings over a 30-year retirement period.
- Bucket Strategy: Involves dividing your retirement savings into several “buckets” based on the timing of withdrawals. The first bucket might contain cash for immediate needs, the second could hold bonds for the medium term, and the third could be invested in stocks for long-term growth. These methods aim to provide both income and growth potential over longer periods.
- Fixed Annuities can provide a guaranteed income stream for life or a set period. This can provide a stable source of income that is part of your overall strategy. Note that it’s important to consider the costs and terms of the annuity contract.
Bulman Wealth Group: Roseville Retirement Planners
Bulman Wealth Group has financial planners in Roseville and Temecula who have a focus on developing custom retirement income plans for successful individuals nearing retirement.
To learn more about our retirement income planning services, connect with us for an introductory call.
Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
