The most important part of your retirement plan is the monthly income you set aside for essential and lifestyle expenses. More retirees — especially those who don’t have a pension — will have to rely on a combination of income sources. Here are some tips to consider as you design your plan.
Create a plan
A recent Ameriprise Financial study found that more than half of the country’s pre-retirees feel overwhelmed and anxious about their impending retirement, and worry that they will run out of money. However, pre-retirees with a retirement income plan are more likely to feel confident about their financial future. You, too, can take action to help lessen fears about the unknown.
Project your expenses
Cut yourself a “reality check” that covers your monthly bills. Tally your expected retirement expenses. Next, consider extras in your retirement lifestyle, including travel, visiting grandkids, starting a small business and community charity work. Expenses after retirement are personalized and may vary over time; make sure your budget supports your goals.
Make a list and check it twice
Will you have multiple potential sources of income available in retirement? List all your assets and income streams, such as Social Security, stocks, bonds, Certificates of Deposit (CDs) or annuity income. Round up your IRAs or 401(k)s and potentially consolidate accounts if it makes sense.
Understand the impact of taxes
Once you hit retirement, taxes may impact you differently. To avoid surprises, ensure that taxes are a part of your retirement income plan. To avoid tax penalties, calculate Required Minimum Distributions (RMDs) — the minimum amount of money you must withdraw from your retirement accounts each year after age 70½. Talk to your tax advisor about RMDs and other strategies to help minimize your retirement tax bill.
Give yourself flexibility
Ensure you have a diversified, balanced portfolio to weather unexpected events that may occur in retirement. Gear some investments for generating stable income — those less likely to change in value–and others for easy conversion to emergency cash. For maximum flexibility, identify the assets that you plan to draw down first.
Time is on your side
The sooner you start thinking about how to pay yourself in retirement, the better off you’ll be. Tackle tasks one at a time and allow yourself the luxury of being able to carefully think through your retirement goals and financial scenarios.
Work with a professional
Consult a financial professional with experience creating reliable, lasting income strategies in retirement.
MICHAEL W. K. YEE, CFP
1585 Kapiolani Blvd., Ste. 1100, Honolulu
808-952-1222 ext. 1240 | michael.w.yee@ampf.com
Michael W. K. Yee, CFP®, CFS®, CLTC, CRPC®, is a Financial Advisor, Certified Financial Planner ™ practitioner with Ameriprise Financial Services, Inc. in Honolulu, Hawai‘i, with Na Ho’okele Financial Advisory Team, a financial advisory practice of Ameriprise Financial Services, Inc. He offers fee-based financial planning and asset management strategies and has been in practice for 29 years.
The Pay Yourself in Retirement study was created by Ameriprise Financial utilizing survey responses from 1,305 Americans ages 55 to 75 with investable assets of at least $100,000. The online survey was commissioned by Ameriprise Financial, Inc., and conducted by Artemis Strategy Group from November 16–22, 2015.
Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser.
Ameriprise Financial Services, Inc. Member FINRA and SIPC
© 2016 Ameriprise Financial, Inc. All rights reserved. File #1438828
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