Transitioning from the working world into retirement brings a wealth of exciting new opportunities – having more time to spend with your family, traveling the world with a loved one, or perhaps devoting fresh time to an old (or a new!) hobby.
If there’s one challenge though, it’s making sure you have sound wealth management strategies in place to support all of your income needs. The good news is that it’s a challenge you can easily address with the help of a financial advisor, and it essentially boils down to four easy steps.
Retirement Lifestyle Planning in 4 Steps
1. Map Out Your Income Needs – these are usually broken down between your fixed income needs (mortgage, insurance premiums, utilities, memberships, etc…) and variable income needs (vacations, home improvements, medical needs, etc…). The key is to be as detailed and as conservative as possible, as it’s almost always better to overestimate your income needs than to underestimate them.
2. Establish Your Set Sources of Income – for most retirees this means Social Security, IRA Required Minimum Distributions and perhaps pension income. It makes sense to try and maximize your Social Security benefit, and there are several ways to do this. In some cases it’s as simple as delaying receipt of your benefits if your financial situation allows for it, and JP Morgan shows us just how impactful “waiting” can be:
Other strategies to potentially increase your Social Security check are the “File and Suspend” strategy or the “Restricted Application.” Choosing wisely between these options, and getting the timing right, can make a big difference in the lifetime benefits you receive.
3. Calculate How Much Income You Need – Social Security benefits aren’t likely to meet all of the planning needs you have, so you’ll need to ‘fund the difference’ with your investment portfolio. Your Required Minimum Distributions (RMDs) will factor-in once you turn 70 ½, but between the age you retire and 70 ½ you may need to tap your investments. With the help of your financial advisor, you can run an analysis to see how much income you can draw from your portfolio (while being careful to minimize risk of running out of money over time), and you can devise wealth management strategies to determine which investment accounts to draw from, and when.
4. Align Your Portfolio’s Allocation with Your Income Objectives – the amount and the timing of your income needs will determine what asset allocation makes sense for your portfolio. Perhaps near-term income needs are better addressed by cash or short-term bond instruments, while longer-term needs can be met through longer-term bonds and equities:
At the end of the day, strategies are different for everyone, and it all depends on your financial situation, your needs and goals, and your tolerance for risk.
Create a Retirement Income Strategy with WrapManager
Our Wealth Managers are ready to help you get your financial life organized and to create an investment plan that addresses all of your planning needs head-on. In addition to walking you through the above four steps and creating an investment plan to chart your course through retirement, we will recommend money managers to oversee your investments along the way. Give us a call today at 1-800-541-7774 or send an email to firstname.lastname@example.org to get started.