A Time-Tested Retirement Income Strategy

Time-tested Retirement Income Strategy

I recently had the pleasure of reconnecting with former clients who reached out after learning about my new firm. Over fifteen years ago, I developed similar retirement income plans for each of them. They shared their continued satisfaction with these plans and expressed interest in potentially working together again. This positive feedback inspired me to share the core principles of that enduring strategy.

This approach focuses on establishing a foundation for retirement by ensuring essential expenses are covered by guaranteed lifetime income sources. Here are the key steps:

1. Categorize Your Expenses: Begin by creating a detailed budget, distinguishing between essential expenses (e.g., utilities, property taxes, insurance, groceries) and discretionary expenses.

2. Identify Lifetime Income Sources: Calculate your total guaranteed lifetime income, which typically includes Social Security benefits and pension payments.

3. Determine the Income Shortfall: Calculate the difference between your total essential expenses and your total lifetime income. This shortfall represents the amount of essential spending not covered by guaranteed income.

4. Assess Investment Assets: Total the value of your current investment portfolio.

5. Explore Lifetime Income Annuities: Obtain quotes for lifetime income annuities that could cover any identified shortfall between your lifetime income and essential expenses.

The fundamental goal of this strategy is to ensure that your essential living costs are met through reliable, guaranteed lifetime income streams. While Social Security and pensions often form the initial layer of this income, annuities can be considered to bridge any remaining gap. It's important to define what constitutes an "essential expense" for your individual circumstances. As an advisor, I've learned that this is a personal decision.

Benefits of This Approach

1. Enhanced Financial Confidence: Knowing that essential expenses are covered by guaranteed income can provide more confidence.

2. Disciplined Investment Strategy: With basic needs secured, clients may feel more comfortable navigating market fluctuations, understanding that their entire retirement security doesn't solely rely on investment performance.

3. Greater Spending Flexibility: Retirees with reliable lifetime income often feel more at ease spending on discretionary items without the constant worry of outliving their resources.

4. Potential for Increased Lifetime Spending: By strategically using guaranteed income for essentials, retirees may feel empowered to spend more from their investment portfolio over their lifetime.

Considerations

1. Potential Reduction in Bequests: This strategy may result in fewer assets being passed on to heirs, as a portion of the portfolio may be allocated to annuities.

2. Longevity Risk: Individuals with shorter life expectancies may not fully realize the potential benefits of lifetime income annuities.

3. Capital Requirements: Implementing this strategy effectively typically requires a sufficient investment portfolio to fund annuity purchases while leaving enough for emergencies and discretionary spending.

4. Ongoing Investment Management: This approach does not eliminate the need for prudent management of the remaining investment portfolio.

If you would like to discuss how this retirement income strategy might apply to your personal situation, or if you'd like to review your current retirement or investment plan, I invite you to schedule a complimentary 30-minute consultation by clicking [HERE]. I'd be happy to answer your questions.

Disclaimer:

Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors and Synergy Wealth Management are separate entities. 

Stratos or Synergy Wealth Management does not provide tax or legal services. Please consult legal or tax professionals for specific information regarding your individual situation.

Content in this material is intended for general information purposes only and should not be construed as specific investment advice or recommendations for any individual.  Please contact your advisor with any questions or for specific recommendations regarding your own circumstances. Investing involves risks including possible loss of principal. There can be no assurance that a specific strategy will yield a profitable result or protect against losses.