
Retirement Income Strategies That Aim To Help Protect Your Principal
As Californians approach retirement, many fear outliving their savings and investments. Long-term care costs and the possible reduction or loss of pensions and Social Security are also major concerns.
With these common worries in mind, you might be searching for ways to safeguard your hard-earned savings while still generating the income needed to enjoy your desired lifestyle.
With decades of wealth management experience, our Bulman Wealth Group team helps individuals and families with retirement planning in California. We create and maintain financial plans that aim to last 30 years or more.
This blog post shares potential strategies to help protect your retirement nest egg while creating a reliable income stream.
The Challenge: Balancing Security and Growth
Retirees face a unique challenge: walking a tightrope between security and growth. On the one hand, protecting your investments from market fluctuations and economic downturns is vital. On the other hand, your portfolio needs to keep up with inflation and generate income to cover your living expenses.
California’s high cost of living adds another layer of complexity. Taxes, home maintenance, and healthcare can significantly strain your retirement finances. Inflation further complicates matters by silently eroding your purchasing power over time. Finding an investment strategy that positions you for both security and growth is essential.
Balancing principal protection with growth potential is no easy feat. It requires sophisticated and strategic investment management techniques for effective risk management and income generation.
Potential Strategies for Protecting Principal and Generating Income
Creating an effective investment strategy starts with knowing your goals, income needs, and risk tolerance. Your risk tolerance shows how much investment fluctuation you can handle before feeling uneasy and possibly making quick decisions that could harm your long-term goals.
At Bulman Wealth Group, we work with each client to understand their risk tolerance. This is crucial for planning retirement income as it helps us decide on asset allocation, diversification, and investment selection. Here are potential approaches to protective investment strategies for retirement income.
Diversification
The cornerstone of any sound retirement income plan is diversification. This means spreading your investments across different asset classes, each with its risk-reward profile. Doing so can help mitigate the impact of volatility in any single asset class. A diversified portfolio might include:
- Bonds generally offer lower risk than stocks but also typically provide a steady stream of income in the form of interest payments. There are various types of bonds, each with its own characteristics.
- Certificates of deposit (CDs) are issued by banks and usually offer a fixed interest rate for a set period. They’re a good option for those seeking a predictable and relatively safe place to park some of their retirement savings.
- Cash and cash equivalents are highly liquid assets that can serve as a safety net during times of market volatility. Examples include money market funds, savings accounts, and short-term bonds.
- Dividend-paying stocks are shares in companies that distribute a portion of their profits to shareholders as dividends. Although stock prices do fluctuate, these stocks can offer a steady income stream over time.
Fixed Annuities
Fixed annuities can offer a guaranteed stream of income in retirement, along with principal protection. With a fixed annuity, you pay a lump sum upfront to an insurance company in exchange for future income payments. These payments are typically guaranteed for a set period or even for your lifetime. However, the trade-off is that fixed annuities usually offer lower potential returns compared to stocks. A trade-off may also include higher fees and early withdrawal penalties.
Medigap and Long-Term Care Insurance
Healthcare costs can be a significant drain on retirement savings. Medigap and long-term care insurance can help you protect your savings from unexpected medical expenses.
Medigap policies help supplement Medicare coverage by filling in the gaps for costs like copayments, coinsurance, and deductibles, providing more comprehensive healthcare protection.
Long-term care insurance can cover the costs of assisted living or nursing home care. It can also provide financial support for in-home care services, adult daycare, and other necessary medical and personal assistance.
While not necessarily an income-generating strategy, these types of insurance can be valuable tools for protecting your principal from medical expenses. Consider them essential parts of your healthcare and long-term care planning in California.
Social Security Optimization
Social Security benefits are a crucial source of income for many retirees. However, there are strategic decisions you can make regarding when to claim benefits that could maximize your lifetime income.
Consulting with a financial advisor in California, like those with Bulman, can help you understand the various claiming options and determine the most advantageous approach for your specific situation.
Importance of a California Financial Advisor
While there is no shortage of financial advisors, it’s wise to understand their experience and how they’re compensated. A financial advisor with a fiduciary duty is legally obligated to act in your best interests and not just sell products that might benefit them financially.
Working with a fiduciary, like those at Bulman Wealth Group, offers significant benefits. Our advisors can help you:
- Craft a personalized retirement income plan: We’ll take the time to understand your individual goals, tax situation, and financial situation. Our advisors will create a customized plan outlining strategies aimed to protect your principal while generating the income you need.
- Navigate state-specific tax benefits: California offers various tax breaks and incentives for retirees. A Bulman financial advisor can help you understand these benefits and position you to take full advantage of retirement tax benefits in California.
- Stay informed on changing markets and regulations: The financial markets are continuously evolving, and tax laws and regulations often change. We’ll inform you of any updates that could affect your retirement income plan.
Navigating the complexities of retirement planning in California can be time-consuming and overwhelming. Choosing the right financial advisor can provide the experience and guidance you need to fully enjoy your golden years.
Bulman Wealth’s Retirement Income Strategies Can Help
For retirement planning in Northern and Southern California, partnering with a professional wealth management team like Bulman can help you avoid common and costly financial mistakes. We are fiduciaries committed to your best interests.
Our proprietary plan simplifies complex concepts into manageable steps, focusing on income, investment, taxes, healthcare, and legacy planning.
Reach out to us today or call (916) 458-8199 to schedule a free consultation with one of our financial advisors in California.