Reasons For Income Planning In Retirement

Monday, November 16, 2020 | Leave a comment

Retirement Income Plan? 7 Reasons One is Needed In Retirement

When you are working, a rock-solid financial plan will do wonders for helping you accumulate money for retirement. This strategy will laser-focus on growth and accumulation as top goals. With a financial advisor’s help, you could stay on track with your plan and gradually build your savings for later years.

But things change as you near retirement. This period is called the ‘retirement red zone‘ for a reason. It’s a time when new planning is needed. Your financial plan will need to change gears, in some ways, in its focus from growth to retirement income.

This can be tricky in some cases, as today we face different challenges in retirement than those before us did. Longer living is one such issue.

It’s a very real concern for many retirees, as one study by Allianz Life found. In the study, six in 10 retirees ranked running out of money while they are still living as a greater fear than death itself.

Just like the plan for growing your money during your career, an income plan can help you maximize your lifetime cash-flow. In turn, you can better enjoy the hard-earned fruits of your lifetime of work.

Many years of hard work brought you to this point. Now it’s time for your money to work and let you enjoy a comfortable, lasting lifestyle.

Below are 7 reason to consider a Retirement Income Plan:

Longer Retirements

Thanks to expanding life expectancies, people may spend one-third of their lives in retirement. Advances in medicine and healthcare have caused people’s lifespans to stretch out into their eighties and beyond. It has made longer the time that people spend in retirement.

Now, your financial plan has to be ready for this increased timespan. There are more years of life to account for in making sure your money lasts as long as you need it.

Changing Income Sources

Chances are retirement will bring some changes to your income. By stepping back from a full-time career, you will also leave behind the predictable earned income or paycheck that you took home every two weeks.

This income source will need to be replaced. There are several possible ways that this can be done, depending on what you have saved, your financial risk tolerance, and your timeline for your goals.

No Strategy for Retirement Spending

Without an income plan, retirement spending can easily go off-track. Some retirees may be tempted to overspend and set themselves up at greater risk of outliving their retirement assets.

Others who have a “saver” mentality may be tempted to underspend, therefore living a compromised lifestyle.

Leave Risk Management to Chance

Don’t have an income plan? Then you aren’t in the best seat to manage all of the risk possibilities. And it’s not just that. Those risks multiply with each additional year of retirement living.

Your financial plan should ready for a bevy of risks, including market risk, healthcare risk, inflation risk, and long-term care risk.

A retirement income plan not only helps you contextualize these risks and manage them. It also gives you wiggle-room to make adjustments should changing needs call for it.

How Can an Income Plan Help Your Retirement?

A rock-solid income plan will help you enjoy a sustainable income in light of all these potential pitfalls. Overall, an effective plan will cover:

Guard Against Longevity Risk

What is a safe balance of money that can be withdrawn from your portfolio without raising the risk of outliving your money?

The old rule of 4% withdrawals per year may be a little optimistic in today’s low-interest rate environment. Many planners are now telling their clients that a 3% withdrawal rate is a safer bet.

You may want to explore a variety of investments and guaranteed insurance products that can help you maintain a certain level of spending, but also keep your portfolio going for the long haul.

Buffer Against Low Interest Rates

What portfolio allocation strategy will you have in order to meet your long-term income needs and other goals? Today’s low-interest rate environment may force you to look past bonds and CDs to other offerings.

Equity income and immediate annuities are a few options that you might consider in order to cover your income needs.

To learn more about establishing and structuring a Guaranteed Income Plan in retirement please contact our firm at 704-451-7020 or e-mail

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