Want to learn how to create income during retirement? Your strategy used will be determined during the accumulation phase or the preservation stage. Today I will discuss what to focus on when you are ready to retire. Focus should be placed on creating the income you need and how to preserve your assets. First, you should take inventory of your income sources. Income sources can include pensions, social security, annuities, or any other avenue considered to be a fixed source. After all income sources are totaled, the expenses incurred each month to maintain the current standard of living will need to be totaled as well. This should include basic expenses such as mortgage, insurance, utilities, food, health insurance, etc. Costs such as entertainment, traveling, hobbies, sporting activities or anything else you may consider doing in retirement, will also need to be included. Once these numbers are calculated, you will have a base figure to work with to see how much retirement income you will need. If you have a shortfall, the difference will need to come from your 401ks, IRAs, or any other type of savings accumulated during your working years. Creating income during retirement could be a huge factor if you decide to try and maintain your current standard of living. So, it’s more beneficial to plan ahead.
Two big questions now remain: 1. How should you make up this shortfall with your hard earned savings? 2. Should you invest in the market, or do you put money into CDs or bonds in order to get a safer, more predictable amount of return? There is no easy answer. As a retiree, you don’t want to risk the volatility of the market and spend your money down, especially now that we are living longer. You also don’t want to put money into low paying CDs or bonds, because you are worried your money won’t keep up with inflation. The short and simple answer is: You need to have balance. There are investment plans today that when structured properly, will give you the best of both worlds; the ability to have an income you cannot outlive and the ability to have your money keep up with inflation. In order to create the marriage it will require, you to use a variety of investment vehicles. For your income producing assets, you may want to consider a concept such as Laddering. You may also want to consider investment products such as market-linked CDs, Treasury Inflation Protected Securities, or an annuity. You may need to use a combination of these sources in order to create the ideal balance for income purposes. Once you have the retirement income portion planned out, you can work on how to invest the rest of the money for growth purposes. This will be important to protect from inflation.
When it comes to protecting your financial independence during retirement it is important that you work with a qualified investment advisor. There are many different products being offered with a variety of different features that can make things confusing. Working with a qualified investment advisor can help guide you through the maze of investment vehicles to fit your retirement goals so you don’t run into any surprises in your golden years.
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