Retirement Income: A Primer

Planning for retirement, and even living in retirement, can leave you asking a lot of questions.

The two most important questions you can ask are:

  1. Where is my retirement income going to come from?
  2.  What will my retirement income go to?

The sources and uses of our assets are the same questions everyone asks themselves from the time they get their first jobs as young adults. As you near retirement, those answers have more profound implications than ever.

So.. where is your retirement income going to come from?

Building a retirement income plan is a crucial step in the retirement process; one that is often overlooked.  We commonly see people who count their Social Security and then have no plan from where or when to take other distributions – let alone how to utilize their remaining assets.

Take a look at the retirement income pyramid below.

income pyramid

Notice how the foundation of the pyramid comes from what we call Guaranteed Income – we consider this to be income streams like Social Security or pensions.  From these we will build our main household budget (utilities, groceries, etc).

Building your income sources is only half the battle, of course. How do we manage where our money goes?

This is where planning is more than just objective dollars and cents. We have to take a step back and ask ourselves some critical questions.

What does a fulfilling retirement look like to me?

How do I want to spend my time and my energy?

What goals can my assets help me accomplish?

These are big, life defining questions. Just as you are unique as a person, so too will your retirement be unique to you. Some people may love the idea of retiring and relishing days at home with loved ones and a trusty dog, while others look forward to retiring from one career to a new found all-encompassing hobby.

So, depending on your personal preference, your expense plan needs to be as customized as your income plan.

We follow a simple, but effective method when working with people who want to better understand their retirement expenses. After brainstorming potential uses of your income and resources, we use a scale to help you find out what’s most important.

needs wants wishes

Needs are usually the easiest to determine; these will be the most important and necessary expenses such as monthly bills, healthcare, etc.

The real planning work begins when we start determining Wants and Wishes. These uses of your income may be more difficult to solve for, but these are the expenses that will help you make the most of what you want your retirement to be.

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