Planning for Retirement

What Does “Planning for Retirement” Really Mean?

Retirement planning is not simply about accumulating the largest possible account balance. The real objective is determining how you will replace the paycheck that stops when you stop working.

During your working years, income generally arrives on a regular schedule. In retirement, you may need to create your own paycheck from several different sources.

Those sources might include Social Security, a pension, employer retirement plans, IRAs, personal savings, annuities, life insurance cash values, or other assets.

The important question becomes:

“Will the income I have available in retirement be enough to support the lifestyle I want, and how long will that income last?”

What Expenses Will Continue After I Retire?

Some expenses may decline after retirement, but many do not disappear.

Your retirement budget may still include housing, utilities, food, transportation, insurance, taxes, healthcare, prescription drugs, travel, helping family members, and unexpected expenses.

Healthcare can become an especially important part of retirement planning.

That is why retirement planning should consider both sides of the equation:

How much income will you have, and how much income will you need?

Where Will My Retirement Income Come From?

Most retirees rely on more than one source of income.

Social Security may provide one source. Some people also have pensions. Others have accumulated money in employer retirement plans such as a 401(k), 403(b) or 457(b), or in IRAs and other accounts.

The IRS recognizes a variety of tax-advantaged retirement arrangements, including 401(k)s and traditional and Roth IRAs. IRS

Insurance-based products, including certain annuities and permanent life insurance, may also be considered as part of a broader retirement strategy depending upon a person’s objectives.

The goal is not necessarily to depend upon one source. It is to understand how your different sources of income can work together.

What Is an Annuity?

An annuity is a contract with an insurance company that can be used to accumulate money and/or provide income.

Some annuities can be structured to provide income for a specified period, while others may provide income that cannot be outlived, subject to the terms and guarantees of the contract.

Different types of annuities work differently.

At Be Smart With Your Money®, we focus on fixed and fixed-indexed insurance products, not variable products or securities.

Insurance-company guarantees are subject to the financial strength and claims-paying ability of the issuing insurer.

What Is the Risk of Outliving My Money?

People are living longer, which means retirement savings may need to last for decades.

This creates what is often called longevity risk, the possibility of living longer than your money lasts.

That is why retirement planning should not focus only on accumulating money before retirement. It should also address:

“How will I turn what I have accumulated into dependable income after I retire?”

What About Inflation?

A dollar today may not purchase the same amount of goods and services 10, 20 or 30 years from now.

That means retirement planning should consider not only the amount of income you expect to receive when you retire, but also how your purchasing power could change over time.

What Happens to My Spouse If I Die First?

For married couples, retirement planning should consider two lives, not just one.

Pension income may change after one spouse dies. Social Security benefits may change. Household expenses may decrease, but they rarely decrease by half.

Life insurance, survivor pension options, annuities and other strategies may be considered when planning for the surviving spouse.

When Should I Start Planning?

Ideally, retirement planning begins years before retirement.

But it is also important when retirement is approaching, and even after retirement has begun.

The questions simply change.

Before retirement, the emphasis may be on accumulation.

As retirement approaches, the emphasis increasingly becomes income, preservation, healthcare, taxes, beneficiaries and legacy.

Start With Your Retirement Paycheck

At Be Smart With Your Money®, we believe retirement planning should begin with a simple question:

“Where will your paycheck come from when you no longer receive a paycheck from an employer?”

Understanding your expected income, expenses, healthcare needs and financial obligations can help you make more informed decisions about the years ahead.