5 Considerations When Developing Your Retirement Income Game Plan
Saving for retirement is one thing. Finding a way to turn that money into an income stream that will last for decades is another.
![](https://cdn.mos.cms.futurecdn.net/u3bNFFQmM5uzUZHnJMfW4M-415-80.jpg)
Dreaming about what you’ll do in retirement is exhilarating. It’s fun to think about golfing and grandkids, cruising the Rhine or maybe relocating to the sunny South.
Planning how you’ll pay for it? Not so much.
Figuring out how to turn your nest egg into an income stream you can live on for decades is tedious, worrisome stuff that often leads to doing nothing at all. In one study, 43% of Americans surveyed said their No. 1 fear in retirement was the possibility of outliving their savings. And yet many are unwilling or incapable of putting together a retirement income plan that will last 10, 20, 30, perhaps even 40 years. Worse yet, there are many who trust financial professionals who don’t specialize in this area of financial planning, either!
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
There are so many theories floating around out there regarding the best ways to save and invest, so it’s no wonder the average consumer is confused. Depending on the strategy you choose , it could mean a difference of thousands of dollars in income EVERY MONTH. Or worse — you might not have enough money to live on in the later years of your life.
Here are five considerations to developing a retirement game plan:
1. Prepare for inflation.
Inflation is often overlooked in financial planning. When it comes to retirement income planning, you’re making decisions today that can affect you decades down the road. If you don’t have a plan for income, you could bank on an income stream in a few decades that won’t cover your costs. Usually 3% is the recommended inflation percentage to plan for. Your Social Security benefits may see some adjustments from year to year, but IRAs, pensions and other retirement vehicles typically won’t have any built-in protections against inflation. So, it’s up to you and your financial professional to determine how much you’ll need at different stages of your life, and then how and when you’ll turn on your various income streams to make the most of what you have.
2. Plan for taxes.
If you don’t want to think about your retirement savings, it’s very unlikely you want to think about taxes. Many people underestimate the amount of planning required to avoid year-end surprises. Or they pay taxes on money they’re not using, which is often a big mistake. You should be as cognizant of changes to your tax bracket as you are to changes in your weight. Don’t count on your tax preparer to alert you to the long-term strategies that can save you. Rather, it’s recommended you work with a financial planner who considers taxes in their planning and a CPA or accountant who engages in tax planning.
3. Separate the expenses you need to cover in retirement into two categories.
In retirement, you’ll have your fixed expenses and your variable expenses. Fixed expenses are things you must cover every single month no matter what, such as your water bill, your electric bill and grocery bill. Your variable expenses are things you’d like to pay for, such as dining out, green fees and going out to movies. When deciding which vehicles you’ll use to cover those expenses, it’s recommended you use a reliable income stream for your fixed expenses, and you can use variable income streams with larger upside potential for your lifestyle expenses.
4. Know how much of your retirement income is variable.
In retirement, you don’t want to have to worry about whether you’ll be able to pay your water bill, your grocery bill or cellphone bill. When considering what retirement income strategy to employ, ask the question, “How much of this income is consistent, and how much could fluctuate?” We find very often that people go into retirement with almost all of their money at risk and no planned income that is reliable or consistent. This can spell disaster down the road.
5. Work with a “retirement” coach.
Make sure you work with someone who specializes in retirement income planning. A traditional financial professional can help you through the accumulation phase of your financial life, but when you’re nearing the preservation and distribution phase, you need someone who can educate you on all the options available. Look for someone who stays up to date on the growing number of income strategies and understands there is no such thing as one size fits all.
As politics and the economy grow ever more unpredictable, both in the U.S. and globally, you must take charge of your own future. Educate yourself: Make sure you’re working with an adviser who focuses on the areas you need. Don’t make the same mistake many Americans do, which is spending more time planning for their next vacation than they do their retirement.
Kim Franke-Folstad contributed to this article.
Jeff Dixson offers securities and advisory services through Madison Avenue Securities, LLC (MAS), member FINRA & SIPC, A Registered Investment Advisor. MAS and NW Financial & Tax Solutions are not affiliated companies.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Jeff Dixson is president and CEO at Northwest Financial and Tax Solutions Inc. and is an Investment Adviser Representative and insurance professional. He hosts a weekly radio show, "The Jeff Dixson Show: The Retirement Coach," and is the author of "Winning the Retirement Game."
-
Visa Is the Worst Dow Stock Wednesday. Here's Why
Visa stock is down sharply Wednesday after the credit card company came up short of revenue expectations for its fiscal Q3.
By Joey Solitro Published
-
Another Analyst Moves to the Sidelines on Tesla Stock After Earnings
Tesla stock is spiraling Wednesday after the EV maker's big earnings miss and Wall Street has been quick to weigh in. Here's what you need to know.
By Joey Solitro Published
-
Confused by Annuities? Making Sense of the Different Types
Many investors aren't sure if annuities are a good option for meeting financial goals. Let's look at the different categories, along with their pros and cons.
By Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC® Published
-
Talkin' 'Bout My Generational Wealth: Baby Boomers
With retirement, each generation has different priorities and challenges. For Baby Boomers, it's a matter of ready or not, here it comes.
By Alvina Lo Published
-
How to Avoid a Big Hassle if Your Financed Car Gets Wrecked
How an insurance check is made out for repairs can cause a world of problems if the lienholder is left out.
By H. Dennis Beaver, Esq. Published
-
Estate Planning Strategies to Consider as Election Nears
Are big changes in tax laws coming soon? Not likely, but you might want to take advantage of higher estate and gift tax exemptions well before the end of 2025.
By David Handler, J.D. Published
-
How to Get Your Money's Worth From Your Financial Adviser
A good financial adviser will focus on how your financial planning and investment strategy align with your lifestyle and aspirations.
By Pam Krueger Published
-
Think of Prenups and Postnups as Financial Planning Tools
These contracts provide a clear framework for asset management and protection and are especially useful if you get married later in life.
By Andrew Hatherley, CDFA®, CRPC® Published
-
Congratulations on Your Raise: Three Things to Do With It
We're not saying you shouldn't spend it on a new car, but there are some considerations to guard against lifestyle creep and to help ensure a comfy retirement.
By Andrew Rosen, CFP®, CEP Published
-
Check Off These Four Financial Tasks to Finish 2024 Strong
The new year is a popular time to set financial goals, but now is the ideal time to check how you're doing. Four tweaks could make a big difference.
By Daniel Razvi, Esquire Published