Income Planning

Income Planning for Retirement

Preservation Financial can help guide you for income planning in retirement. Perhaps you want protection for your income. Or, you may want to ensure that your spouse will continue to have income if you pass away first. Whatever the reasons, an income plan can help you understand your retirement needs. Together, we can help you design an income plan that works for you.

What is Income Planning?

An income plan is a high-level picture of your retirement income possibilities. First, we start by gathering up your financial information. This includes looking at financial information such as bank accounts, CDs, retirement accounts, stocks, bonds, and notes. In addition, we also review other assets and liabilities. For example, we can examine real estate, insurance policies, and business holdings. Also, debt service is part of planning your income as well. During our fact-finding, we may also discuss your mortgages, loans, and consumer debts. Finally, we will get a snapshot of your retirement income sources. For instance, do you have possible income from any of the following?

  • Bank Interest
  • Private Pension(s)
  • Government or Military Pension(s)
  • Social Security (for one or both spouses)
  • Rental Income (or other passive income)
  • Business Income
  • Trust Distributions
  • Loan Repayments to You
  • Annuities
  • Life Insurance
  • Potential Income from Stocks or Bonds
  • Retirement Plans
  • Other Investments

Indeed, planning out your retirement income is more than just a calculation of total assets. It is an overall view of current retirement income and factors that could impact income. In fact, you should consider money coming in, assets, budgets, expenses and money owed. In addition, it is a good idea to plan for the “what ifs,” as much as possible.

smiling couple walking in park with their dog income planning tallahassee fl

How much money do you need? It’s a common question from retirees. First, look at your main expenses including housing, food, transportation and any debt service. Then, think about other costs such as insurance, taxes, and even inflation. Finally, determine how much discretionary income you would like to have each month. For example, you may wish to have money to dine out, give donations, or to go on trips.  Once you have these basics laid out, it is time to look at income. 

Income generally comes in two types: fixed and variable. If you or your spouse have a pension, annuity income, or social security benefits, you have fixed income. The other type of income (variable) includes money that may not be reliable, steady, or provide the same amount each month. Generally, it is a good idea to have at least a portion of your retirement include some type of reliable income. During our income planning analysis, we can discuss your options.

According to Michael R. Steranka, author of Income for Life Blueprint, there is a 60% chance that either you or your spouse will live to be age 95 or older. As medical science advances, it is possible this likelihood will increase. The question is, “Are you prepared?” Some sources of income such as pensions, social security, and even certain retirement accounts are tied to one spouse. Therefore, when that spouse dies, the remaining partner may not have as much income as they did before. Without through income planning, you may not know how much your income may change. 

Importantly, an income plan can help you find out what would happen to your income if your spouse dies. In fact, there are even ways to look at possible impact on your income 5, 10, 15, or 20 years down the line. No one wants to talk or think about losing a spouse. However, there could be very real implications in income when that happens. We encourage you to review those potential outcomes with us at an individualized income planning session.

The Income Cliff

Upon the death of your spouse, it is possible that your income drops. But, how much could it drop? Unfortunately, some people experience their income dropping by half or more. For instance, let’s say that one spouse has a pension of $40,000 per year. Both people have social security benefits as well of about $20,000 each. However, the pension may only pay 1/2 of that amount to the surviving spouse. Also, a spouse can only collect social security for themselves or as a surviving spouse (but, not both). Therefore, the widow in this scenario would go from an income of $80,000 down to only $40,000 per year. Indeed, this is an income cliff.

As time goes on, the impact of income loss may grow. In the above example, the surviving spouse would be losing $40,000 per year. If that person lives for 30 years, they have missed out on $1.2 million. However, there are strategies to help create or protect additional income. Income planning can help you know how your income may change if your spouse dies before you. With this knowledge, you can look for ways to supplement necessary income. Contact us today for a no-obligation personalized income planning session.

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