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Steps For Retirement Income Planning

› Retirement Planning › Steps For Retirement Income Planning

February 1, 2021 by Campbell Wealth Management

money growing after having a retirement income planningMany people work their entire life to save money and generate the most significant returns possible with a diversified portfolio. However, as aging adults inch closer to retirement, it becomes even more important to build a nest egg to support a comfortable lifestyle. This is where well-designed retirement income planning can come in handy.

What Is Retirement Income Planning?

A retirement income plan is a timeline that shows where a person’s retirement income will come from on a year-to-year basis. Retirement income planning should include guaranteed income, ideally from multiple sources, such as social security, pensions and fixed income annuities. The primary goal of having a solid retirement income plan is to meet the individual’s long-term needs and goals and ensure that all core expenses are covered. A retirement income plan should be flexible to allow for updates or modifications as needed.

Why You Need a Strategy for Retirement Planning

Today, people are living longer than ever before. According to the Centers for Disease Control and Prevention (CDC), the average life expectancy in the U.S. is 78.7. With the average age of retirement at 61, many people need to save enough money to support themselves for more than a decade.

couple getting together their Retirement Income PlanningIt is not possible to see the future, which means that aging adults must be prepared for whatever comes their way. The right retirement planning strategy can help ensure that any obstacles that develop do not cause financial ruin. Retirement income planning can also prevent a person from relying on just one income source, which can be very risky.

Steps To Take For Retirement Income Planning

It is never too early or late to start planning for retirement. Retirement income planning can provide clients the ability to better manage their finances in a way that protects their future. Before starting the retirement income planning process, it is important to take inventory of all resources. Gather investment and savings account statements, as well as information on other sources of income, such as real estate property.

Also include all future contributions, such as money put into 401(k)s or other retirement accounts.
Once a client has a basic understanding of where they stand financially, they can confidently begin the retirement income planning process. Here is a breakdown of the steps involved in a retirement income plan:

Consider Income Annuities

The typical portfolio includes three asset classes – equities, cash and fixed. When creating a retirement income plan, consider adding a new asset class to the portfolio. Income annuities should be considered an asset class as they are a type of investment that pays out a monthly income. With income annuities, a part of a person’s retirement funds can be converted into a stream of guaranteed lifetime income payments via a lump-sum known as a premium. It is best to consult with your financial manager if this is a viable option for your retirement.

Line Up Your Investments With Tax Treatment Of Saving

The tax situation for different types of investments should never be treated the same. For example, a client should treat their rollover IRAs differently than they would treat their personal savings. When making withdrawals from a rollover IRA, capital gains and dividends are taxed as normal income. However, in a client’s savings account, they receive favorable treatment. Retirement income planning can help a person more efficiently handle their accounts and invest more tax-efficiently to save money over time. Please consult with your tax professional before making any adjustments.

Have A Plan For IRA Withdrawals

someone going golfing after having a retirement income planning helpPart of the retirement income planning process involves having a plan for IRA withdrawals. IRA withdrawal rules and penalties can vary depending on the age of the account holder. Generally, early IRA withdrawal penalties are given to account holders who withdraw funds before age 59 ½. With traditional, rollover, SIMPLE and SEP IRAs, contributions are made on a pre-tax basis.

Ideally, clients should manage their withdrawals from their rollover IRA savings instead of taking the minimum distributions mandated by the IRS. It can be cost-effective for clients to adopt an investment strategy that reduces their risks and incorporates the income annuity cash flow. It is encouraged to consult with your financial and tax professionals to determine the appropriate course of action.

Work with the Retirement Income Planning Professional

One of the most important things that a person can do before retirement is to have a strategic plan to support themselves in their golden years. A typical retirement income plan covers more than what investments to choose. The plan should outline detailed spending and income timelines and identify any gaps between the two. Some people may then choose to invest further to help fill in these gaps and create a more secure financial future.

For more information about the steps involved in retirement income planning or to speak with a professional about saving for retirement, contact the retirement income planning professionals at Campbell Wealth Management, Inc.

Filed Under: Retirement Planning

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The Registered Investment Advisor, Campbell Wealth Management is registered in VA, MD, DC, NH, NY, FL & TX All Contents © 2020 Campbell Wealth Management, Inc. Securities offered only by duly registered individuals through Madison Avenue Securities, LLC (MAS), member FINRA/SIPC. Advisory services offered only by duly registered individuals through Campbell Wealth Management, Inc (CWM), a Registered Investment Advisor. MAS and CWM are not affiliated entities.

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