Retirement Income Sources
How will you meet the retirement income challenge? According to a 2008 National Institute on Aging study, people age 85 and older constitute the fastest growing segment of the US population. The study also reported with the advancements being made in science and medicine, Americans living to age 100 may become common place within the next decade, and to age 130 by 2050. The reality is many of us may well live 25, 30, 40 or more years in retirement and out of necessity, will have to assume increasing responsibility for our financial  security. Many of us look forward to living a long and active retirement. However, living a long time in retirement exposes your savings and investments to longevity risk, the likelihood that you may outlive your financial resources. Unless you plan to continue working after you retire, you will no longer have a paycheck to meet your expenses. To add to this dilemma, pensions have essentially disappeared for most private sector retirees. And though they may still be available for some government and union employees, many of these plans are severely under-funded and may not be able to fully meet their obligations going forward. So where will the income you need come from?
For many Americans, there are three potential sources of capital to produce income during retirement:
- Human Capital – continuing to work full or part time, or engaging in income-producing hobbies;
- Social Capital – benefits derived from Social Security, Medicare or Medicaid, pensions (if available), financial assistance from relatives and friends, and support from religious or civic organizations;
- Financial Capital – the sum of your personal and retirement savings, investments, certain types of insurance products and real estate holdings.
Our Retirement by Design™ process fully illustrates how you may be able to integrate these different sources of capital to achieve higher lifetime income with lower taxes during retirement. It enables you to:
- Compare the impact on your total income (as well as spousal and survivor benefits) of starting Social Security benefits early, at normal retirement age and of deferring until a later age. This is extremely important for couples!
- Evaluate the effect of different withdrawal rates and required minimum distributions on your investment and retirement accounts.
- Decide which accounts to take money from first and in what order. This is particularly beneficial if you have both qualified and non-qualified holdings.
- See if using a portion of your investments or retirement savings to fund a personal pension plan and create a source of lifetime income makes sense.
If you'd like to learn more about Social Security, required minimum distributions or creating a personal pension plan, follow the corresponding links below. Social Security ⇒ Required Minimum Distributions ⇒ Personal Pension Plans ⇒ If you would like to schedule a complimentary appointment to discuss your concerns about having enough income during retirement or ask us a question on any of the above concepts, please select the appropriate link below: Request an Appointment ⇒ Ask a Question ⇒
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