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Solving the Money Problem: Retirement Income Planning

George Grombacher June 21, 2022

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Solving the Money Problem: Retirement Income Planning

There was a time when retirement was straightforward. You worked for the same company for 30 years, had a retirement party, then rode off into the sunset with a gold watch, a pension, and Social Security. 


Not so much today. 


In fact, it might be the opposite. Solving the money problem is more complicated than it used to be. 


Today, no one spends 30 years at one company (no gold watch), Social Security is shaky. Not only are we responsible for accumulating money for retirement, we’re also responsible for designing our retirement income. 


Over the course of my 20+ years as a financial advisor, some aspects of this type of planning have changed, but the fundamentals have remained the same. That’s what I want to help you better understand. 


Here’s what we’ll cover:


  • The protection phase

  • The accumulation phase

  • The distribution phase

  • Risks in retirement

  • Taking ownership


One more thought before we get into it; it’s imperative to get clear on how you want your life to be. What do you want it to look like tomorrow, 10 years from now, and 30 years from now? In service of helping you explore your future, you can access our Goals course for free. 


Let’s get started.


The protection phase


We all go through the same three phases of our financial lives; protection, accumulation and distribution. Understanding the important planning considerations during each phase is essential. 




This is all about setting your financial foundation. It means knowing your monthly cash flow, establishing and maintaining an emergency fund, having the proper insurances as well as legal documents. 


As you’re saving and investing for retirement, your planning will be different than when you’re actually in retirement. Your cash flow, budgeting and emergency fund needs will be similar, but there will probably be some meaningful differences once you retire. It’s important to keep this in mind as you’re planning. 



The accumulation phase


What is your plan for retirement? Will you use your 401(k) at work as your primary accumulation vehicle? Will you develop a portfolio of real estate? Is your business your retirement plan? Whatever it is, it’s important to consistently monitor your progress and make any necessary changes.


Too often, we avoid thinking about our retirement plan because we think it’s too complicated. And while there’s a lot to think about, there are only a handful of truly important variables. 


The key variables to consider are:


  • When you’ll retire- What age do you want to be able to step away from full-time work?
  • How much income you’ll need- Perhaps you don’t intend to ever stop working, and you’ll continue working part time. Maybe you never want to work again, so you’ll need to replace 100% of your income. 
  • What interest rate you’re going to plan with- Are you comfortable using a 10% rate of return, or does a more conservative 6% seem realistic?


Getting your initial plan together is an important step. From there, you’ll consistently monitor it as your thinking as well as outside variables change. 


The distribution phase


You worked hard, saved and invested, and now it’s time to retire. How best to take what you’ve saved and turn it into an income that will last for as long as you need it to? For better or worse, there’s not a right or wrong way to do this. 


Here’s a helpful rule of thumb; plan for enough guaranteed lifetime income to cover your fixed expenses. Your fixed expenses include:


  • Housing 
  • Transportation
  • Food
  • Healthcare
  • Insurance
  • Lifestyle


Where does guaranteed lifetime income come from? Here are the primary sources:


  • Social Security
  • Pensions
  • Guaranteed lifetime income annuities


Certainly, there are other ways to create sustainable streams of income, but the previous three are guaranteed to be there for as long as you need them, even if you live well past 100 years old. 


Risks in retirement


We plan for our futures, and try to look at our situation from as many different angles as we can. We want to position ourselves for success. What are the biggest risks or threats in retirement?


  • Healthcare costs- It’s estimated an average couple may need upwards of $300,000 to cover medical care costs in retirement.
  • Inflation- The cost of living continues to increase every year, eroding our purchasing power. 
  • Market risk- All markets have a degree of risk. 
  • Liquidity- Emergencies happen when we least expect. 
  • Longevity- While it sounds odd, living longer than expected can be financially negative. We don’t want to outlive our money. 


Like all risks, we protect against them by planning, saving, and maintaining the proper insurances. 


Taking ownership


There will never be anyone more concerned about your financial future than you are. It’s essential you take 100% ownership of your retirement. 


Taking 100% ownership doesn’t mean you need to do everything. You can certainly outsource some or all of the planning to professionals. But it does require you to pay close attention, and take an active interest to ensure everything you want to happen, actually happens. 


So much of success in planning your retirement is in giving it the attention it deserves. The sooner you can start, the easier it is to accomplish your goals. 


If you’d like to learn more, check out our Retire Happily course. You can connect with one of our Certified Partners to get any question answered. 


We’ve got three free courses as well: Our Goals Course, Values Course, and our Get Out of Debt course. 


If you’re ready to take control of your financial life, check out our DIY Financial Plan course. 


If you’d like help getting on the same page with your partner, check out our Same $ Page Course. 


Stay up to date by getting our monthly updates.


Check out the LifeBlood podcast.


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