Broker Check

Income in Retirement

Once you are close to retiring or have already retired, you might wonder why we have a topic on Income in Retirement. We include this very important information because it is important to understand your monthly cash flow along with understanding your monthly expenses.

  • Develop a budget to understand the amount of monthly income you need. Visit our budget calculator to get a better idea of what you are spending per month and how to accurately account for all of the “hidden” monthly expenses that you incur.
    • Don’t forget to account for a new hobby that you might take up in retirement. If it is expensive, you need to think through how this can impact your monthly budget.
    • Home upgrades or improvements also need to be accounted for. We all know that doing things to our homes is expensive so be realistic when you consider whether or not your home will need improvements through the remainder of your lifetime. Even though you have retired, will you stop wanting to make changes to your home?
    • Consider people who are in your lives today – will they need help financially in the future and will you want to provide help? Perhaps you want to help a child with a down payment for a home. Or, you want to help grandchildren pay for college. If the answer could be yes, you’ll need to assume some level of financial contribution in your retirement budget. If you have a special needs family member, it is important to develop a plan for their care and ensure all expenses are accounted for in your budget.
    • Caring for parents and in-laws as they age can be an unexpected expense for retirees. Be sure to understand what your parents have in place in terms of long term care insurance, and discuss their plans regarding living expenses and their realistic budget. Having a discussion early in your retirement can ensure everyone is on the same page in terms of expectations and budgeting.
  • Identify all sources of income. This may sound really basic, but it is important to understand the source of your retirement and what is guaranteed vs. variable.
    • Guaranteed income includes funds that you will receive on a consistent basis 
      • Social security – but be prepared – currently social security accounts for 39% of most retirees income. However, the workforce is shrinking and the number of people obtaining benefits is increasing – putting a strain on our social security system. 
      • Pension 
      • Annuity income 
    • Variable or discretionary income 
      • Part time job 
      • Funds from an 401(k)/ IRA (including systematic withdrawal strategies) 
      • Funds from other investments including real estate, taxable accounts, settlements, royalties, business partnerships, etc. 
  • Allow for fluctuations in market conditions and remember, a well-diversified portfolio can help balance risk.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.