&l;p&g;Are you nearing retirement or even retired and feeling overwhelmed by all the noise? Do you wonder how/where to begin to develop a retirement income strategy?
&l;img class=&q;size-large wp-image-543&q; src=&q;http://blogs-images.forbes.com/impactpartners/files/2018/05/GettyImages-688969314-web-1200×793.jpg?width=960&q; alt=&q;&q; data-height=&q;793&q; data-width=&q;1200&q;&g; There is no one product out there that provides safety, income, growth, liquidity, and legacy.
With so much information at your fingertips &a;mdash; whether it&a;rsquo;s from the internet, radio, or TV &a;mdash; it only adds to the confusion and frustration about what to do with your money. Before you purchase a financial solution or roll over that IRA, discuss your financial goals with your advisor.
There is no one product out there that provides safety, income, growth, liquidity, and legacy. With a properly developed income plan, you can accomplish those things; it just takes multiple solutions. Make sure you explore all your optional solutions for each goal.
Here are six steps to guide you when developing a retirement income plan:
&l;/p&g;&l;ol&g;&l;li&g;&l;strong&g;Create an inventory of your expenses.&l;/strong&g;&l;/li&g;
&l;/ol&g;&l;strong&g;&a;nbsp;&l;/strong&g;Soon, you&a;rsquo;ll go from earning a paycheck to producing a paycheck from the assets you saved.
Create an inventory with living expenses &a;mdash; things you need to pay for to live, like housing, food, clothing, transportation, health care, and utilities &a;mdash; in one column. The other column should be lifestyle expenses, like vacations, dining out, hobbies &a;mdash; anything that doesn&a;rsquo;t go into the living expenses column.
Without knowing how much you need every month to live, you can&a;rsquo;t make educated decisions about how much money you should take out, when you should file for Social Security, or how much risk you should take with your assets.
&l;ol start=&q;2&q;&g;&l;li&g;&l;strong&g;Have a strategy for maximizing Social Security.&l;/strong&g;&l;/li&g;
A strategy is not following what your friends and family members did. Each household has different income needs and assets that can impact how and when to file. Whether you&a;rsquo;re married, single, divorced, or widowed, there&a;rsquo;s a filing strategy that will allow you to get more from Social Security. The only way to figure this out is to sit down with someone who will analyze your income needs and assets to optimize your cash flow.
&l;ol start=&q;3&q;&g;&l;li&g;&l;strong&g;Cover your income gap, and then some, with predictable income.&l;/strong&g;&l;/li&g;
After you have completed Steps 1 and 2, you&a;rsquo;ll likely have an income gap between your living expenses and Social Security income. At this point, we use income strategies to cover that gap, and then some, with predictable income.
The reason we include &a;ldquo;and then some&a;rdquo; is because there is something emotional that happens during retirement when you know that, every month, you have extra income that can go in the bank. When you decide to go on a vacation, buy a car, fix the roof, etc., you take it out of your bank account and don&a;rsquo;t feel like you&a;rsquo;re &l;em&g;that&l;/em&g; much closer to running out of money in retirement &a;mdash; that money is replaced every month.
Also, as you transition into retirement, there are a whole new set of risks you now need to plan around. Some of those risks include longevity, withdrawal rate, market, inflation, sequence of return, taxation, deflation, regulatory and long-term care &a;mdash; one of the greatest is longevity!
If you live until age 70, it doesn&a;rsquo;t matter if the market drops 30%, inflation is 10%, you took out too much money, or taxes doubled &a;mdash; odds are you didn&a;rsquo;t live long enough for these things to possibly make you run of money. If you live until 85, 90, or even 100, you now have lived long enough for this concern to be valid. Having predictable income allows you to take the risk of longevity off the table!
&l;ol start=&q;4&q;&g;&l;li&g;&l;strong&g;Use remaining assets to protect against inflation.&l;/strong&g;&l;/li&g;
We&a;rsquo;re all aware that things get more expensive over time. Once Step 3 is completed, I recommend working with a team of professionals who can help allocate your remaining assets to outpace inflation with the approach of protecting first, then growing. This is a different way of investing, but it can allow you to avoid the big swings in your portfolio and still see consist growth.
&l;ol start=&q;5&q;&g;&l;li&g;&l;strong&g;Have a plan for long-term care.&l;/strong&g;&l;/li&g;
Having a long-term care plan is an important step; if missed, it can wipe out all your hard work. Having long-term care doesn&a;rsquo;t necessarily mean living in a nursing home in order to receive care or pay for care. I&a;rsquo;ve seen hundreds of thousands of dollars be used to pay for care instead of staying as part of the legacy due to the lack of a long-term care plan.
There are some ways you can protect yourself against long-term care, such as long-term care insurance, hybrid life/LTC insurance, asset-based LTC, or self-insuring. I believe the best solution is protecting your assets without buying LTC.
&l;ol start=&q;6&q;&g;&l;li&g;&l;strong&g;Have a tax strategy.&l;/strong&g;&l;/li&g;
&l;/ol&g;&l;strong&g;&a;nbsp;&l;/strong&g;Some of us have heard about asset diversification, but not many have discussed tax diversification. Two areas can be impacted by taxes: your income and your legacy. Having your assets held in the wrong type of account, or having the wrong amount, could make your Social Security taxable. There are three different tax buckets (tax-deferred, taxable, and tax-free), and each one should have a certain amount in it. If the wrong amount is in each bucket, it will make you take more money out of your other assets, so you can net the same income you need. If you do this for an extended time, you may pay a large amount of unnecessary taxes.
If you plan on leaving money behind, and those assets are subject to future unknown tax rates, you could be leaving a much smaller legacy than you planned.&l;strong&g;&a;nbsp;&l;/strong&g;
&l;em&g;This content was brought to you by Impact PartnersVoice. Insurance and annuities offered through Ryan Schaner of Schaner Financial, MI Insurance License #0505840. DT489652-0519&l;/em&g;