During the next three weeks, I will be talking briefly on “The Big Three”. These three cornerstones are extremely important for ALL retirees. So PAY ATTENTION! If you would like to talk more about these topics, feel free to comment below or send an email, which seems to be the way you all like to respond with questions!
The first cornerstone of a successful long-term income plan is that it needs to be there NO MATTER WHAT happens in the marketplace. No ifs and or buts about it Why? Because income makes people happy and you significantly decrease your chances of running out of money and going to work at Wal-Mart half way into retirement.
For many retirees, social security seems to be the basis for their retirement income. Makes sense because it is guaranteed, it does arrive on time, every time, but most fail to realize that social security is not supposed to be their only source of income after they stop working. They make the mistake of continuously taking withdrawals from their IRA, which was rolled over from the 401K, and don’t see how badly their distributions are hurting their long term future.. until its too late. When it comes time to decide when to start taking your Social Security and you are in good health with longevity in your family, it might make sense to delay taking your Social Security.
I can hear it already “Alan, if I delay Social Security, and you’re telling me to be careful about my distributions from my retirement savings, what am I suppose to do?!”
Well, if you’re lucky enough, another source of income will be your employer-sponsored pension but they are a thing of the past nowadays, which I wrote about a couple of weeks ago. If you’re lucky enough to have one, your administrator will provide you with different options for receiving your monthly income. One important thing to understand about your pension is that it may NOT offer inflation protection. Inflation is the deadly ghost in the room that everyone knows is there but gets ignored because you can’t see it. In the third cornerstone, I will discuss the impact of inflation in regards to your income plan.
If you don’t have an employer-sponsored pension plan, there is no need for concern.. you can build it yourself. You can mold your own personal pension however you like but this pension will give you the income stream that you and your spouse deserve and need in retirement. It is a much better option than taking timed or random distributions for your retirement savings while you hope and pray that the market performs in your favor to make up for the lack of income because of a poorly put together plan.
For most retirees, it takes a combination of Social Security and a pension, however, it is built, to be able to cover their core monthly expenses. It is absolutely crucial in any retirement plan that you cover those core expenses with sources of no-doubt-about-it income.