People are living longer and it’s not unusual to live 30 years or more in retirement. How you support your lifestyle in and throughout retirement begins with developing an income strategy based on your needs.
These five steps can help you turn your retirement savings into your retirement income:
- Organize your retirement resources: Make a list of all your savings and possible income sources. If you have a number of retirement accounts at multiple financial institutions or companies you have worked at, rolling them into one IRA may help simplify retirement planning.
- Understand your income needs: Review your monthly spending to estimate how much income you’ll need to cover basics like food and housing, along with discretionary needs like travel and entertainment. Be sure to consider increasing costs due to inflation, when you figure out how much annual income you will need.
- Manage your risk: Base your income plan on how long you can expect to live based on your current age (your longevity), not on average life expectancy. Remember to plan for potential health care expenses, since not everything is covered by Medicare. More conservative investing can protect your savings, but investing a portion of your assets in stocks may provide the growth potential necessary to outpace inflation.
- Create your retirement income: Consider the effects of inflation, market volatility and income taxes when you’re deciding how to withdraw money in retirement. Your retirement income should be large enough to help meet your expenses yet small enough so you won’t run out of money prematurely.
- Review your income plan: From monitoring your spending and staying within your budget, to reviewing your financial and estate planning documents, there is a lot to keep track of in retirement. Every year, and whenever you experience the unexpected, take the initiative to make necessary adjustments to your income plan. To help you find ways to strengthen your plan or identify gaps, give yourself a retirement income plan review and checkup to develop your retirement income strategy or prepare for a meeting with a financial advisor.