There is no one-size-fits-all retirement plan. Everyone has different income levels, debt accumulations, monthly expenses and savings, which all contribute to the financial stability of their future. Retirement income planning is a custom process that enables adults to begin preparing for their future financial needs.
What Does Retirement Income Planning Entail?
It is not always clear how much a person will need to retire comfortably. It is essential to sit down and crunch the numbers to determine how much income a person will need to save or continue receiving during retirement to cover expenses and live comfortably. This is exactly what retirement income planning aims to work toward.
Retirement income planning strategies focus on saving money, generating passive income, and maximizing benefits. When aging adults transition from working income to retirement income, they must ensure that the amount brought in is adequate for all aspects of living, including taxes, investments and other purposes.
Benefits Of Retirement Income Planning
Retirement income planning can have countless benefits if developed and implemented effectively. With help from an experienced wealth management advisor, individuals can gain a more in-depth look at their current financial state and determine what changes need to be made to reach key goals and objectives.
Some of the top benefits of retirement income planning include the following:
One of the most important benefits of retirement income planning is the emotional and psychological advantages that it delivers. A survey published by Capital One found that 77 percent of Americans are anxious about their finances, and approximately 58 percent reported that their lives are controlled by money.
Money worries can result in a wide range of conditions and disorders, such as stress and depression. This cloud of uncertainty can linger for years, impacting every financial decision they make. With retirement income planning, individuals can achieve greater stability knowing that they have planned well for their future.
Potential Tax Benefits
Taxes can monopolize a person’s savings and income, leaving little left for daily expenses. While there is no way to eliminate taxes, those that engage in retirement income planning may enjoy certain tax benefits. Retirement planning may help reduce the amount of taxes paid during retirement and help ensure that beneficiaries pay as little tax as possible.
An essential technique often used in retirement income planning is tax diversification. This process involves creating different “pools” of money in tax-free, tax-deferred and taxable accounts. Using these three pools, money can be strategically withdrawn during retirement in a way that minimizes the amount of taxes paid.
Puts Everyone On The Same Page
While saving for retirement primarily focuses on the future needs of the saver him- or herself, there may be other people involved. For example, someone saving for retirement may want to have a conversation with their spouse about how much money they will need to cover expenses and what type of lifestyle they desire to have in retirement.
Some retirement income plans also accommodate other people, such as a couple’s children. A person may want to meet certain financial objectives that aid their closest family members, such as their adult children. These types of goals should be planned ahead of time.
Can View Financial Issues In Context
Retirement income planning not only impacts a person’s future but all of the financial decisions they make throughout their lifetime. A retirement plan could impact a person’s decision to stay at their current career or start their own business. Or maybe a person is trying to decide if they should go back to school to earn more money or change their lifestyle to increase their savings. These types of financial decisions are different for everyone and should be considered during the retirement planning process.
Help You Stay On Track With Your Retirement Plan
Without a detailed plan in place, it can be tough to stay financially on track. Having a retirement income plan in place encourages people to save, invest and continue towards their goals and objectives. With a retirement income plan, individuals know exactly how much they can safely spend each year in retirement and how much they need to save before retirement to reach these goals. Retirement income plans are also flexible, which means that they can be modified and updated as life situations change.
Work With Professionals For Retirement Income Planning
Planning for retirement can be a challenging endeavor, but the rewards are worth the lifelong effort. Having a ‘cushion’ during retirement allows aging adults to enjoy their golden years without constant money worries. Starting the retirement planning process as early as possible enables people to save even more over their lifetime.
Want to learn more about the benefits of retirement income planning? Reach out to a professional wealth management advisor at Campbell Wealth Management, Inc. today.