A Blueprint for Retirement: The Importance of Income Planning
In retirement planning, ensuring a steady income stream is crucial. Whether you have substantial savings or more modest funds, the need for reliable income often exceeds expectations. Let’s explore why income planning is essential for a secure retirement.
Guaranteed Expenses Require Guaranteed Income
Every retiree faces fixed, non-negotiable expenses that demand a consistent income. More importantly, can they be certain that income will sustain them for life? Many struggle with these questions, often distracted by daily life and market fluctuations.
The Changing Retirement Landscape
Historically, retirees relied on pension plan annuity payouts, government pensions, and Social Security. However, many traditional company pensions, defined benefit plans, that guarantee lifetime payouts have disappeared, transferring the investment risk to employees through defined contribution plans.
Addressing Modern-Day Concerns
With these changes come critical questions:
- Will Social Security remain a reliable income source for future retirees?
- How will couples manage the loss of Social Security income after one spouse passes?
- Is your pension structured for single-life or joint-life payouts?
- Can stock market accounts reliably provide monthly income for 20-30 years, especially during market downturns?
- Could the possibility of Sequence of Returns risk derail your long term retirement?
The Reality of Market Volatility
In the past two decades, the market has experienced 50% losses twice. If such a downturn occurs during your retirement, it could significantly impact your lifestyle. So the larger question is, who will manage your investments and fees over three decades?
Sequence of Returns Risk-What Is It?
For those without additional sources of lifetime income, the timing of their retirement is critical. Sequence of Returns Risk refers to the potential negative impact of withdrawal timing on a retirement account’s overall return. This risk occurs when systematic withdrawals reduce the portfolio’s value, making it more vulnerable to market downturns and limiting future growth. In essence, sequence risk is the danger that the order and the amount of withdrawals may negatively affect their income over time, especially for those relying solely on their investments.
No Second Chances in Retirement
Facing at least one significant income disruption during a 20-30 year retirement is likely. Are you prepared to risk your retirement income, excluding Social Security and pensions? Fortunately, there are strategies that can provide potential market linked returns during prosperous years while ensuring past gains against market downturns, taxes and fees while guaranteeing lifetime income.
Secure Your Financial Future
Why leave your retirement to chance? There are no do-overs in retirement. To evaluate your current retirement plan, consider a stress test and anticipate any worst-case scenarios. Discover if and when you might deplete your funds. Take proactive steps now to ensure a comfortable and financially stable retirement with income you can’t outlive.
Take control of your financial future today and secure your retirement with careful and strategic income planning.
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