Where to Find Your Retirement Income
Retirement income is not a black and white topic. There is not one key source of retirement income and everyone’s plans will be different. A major step towards a successful retirement plan is identifying all your potential sources of income and how much you can expect them to cover. In this article, we will help you to identify 5 main sources of retirement income.
Most people depend on social security as their main source of retirement income. Once you have found your California Social Security office locations or any other region you live in, it is extremely important that you calculate when is the best time to file for your benefits. For example, filing before your full retirement age will cost you 25% of your income! This is a substantial decrease, especially if you are relying on this as your main source of income.
A Certified Financial Planner or CFP , can help you with this dilemma. They can run a report, based off of your information and current financial situation that will determine your optimal time to file for social security. This will, in turn, help you decide when you can retire and what gaps in your retirement income you will need to fill.
Pensions used to be commonly offered to all employees. But now, they are becoming scarce, and come with a lot of risks as there are many a misseling sipp these days. If you have one, you will want to talk with the mis-sold investment specialist and your plan provider to find out the specifics of your pension’s payouts.
First, you will need to find out if your account is classified as single or as joint and survivor. If your account is classified as single, benefits are given only to you and they expire at your death. If your pension is joint and survivor, you will receive reduced benefits throughout both your lifetime and your spouses. The payments will not cease until both of you have passed.
You will also want to find out the plans payment options and frequency. It is also important to find out if that amount will increase with inflation. Knowing this information will help you to see how much of your retirement income gap is complete so you can plan accordingly.
3. Retirement Savings and Investments
Whether a bank savings account, CD, 401(k), IRA, ROTH IRA, or traditional investment account, you will have to coordinate how it fits into your retirement plan. Since there are so many different types of accounts it can get confusing. In regards to each plan you will have to figure out the following:
- Withdrawals: You will need to find out how much you can withdraw each year sustainably throughout your retirement. You will need to determine how much of your retirement income you will need your investments to fill and if your current savings and investments can close the gap.
- Taxes: Tax considerations are extremely important when calculating withdrawals from qualified accounts. Non-qualified accounts should be utilized first, to lessen the tax burden. Then you should take distributions from your qualified accounts methodically to keep taxes low.
- Required Minimum Distributions: RMDs are required minimum distributions that you must begin taking from qualified accounts once you reach 70 . You will need to take these into account as well.
In Addition, taking out loans in preparation for retirement might be a good idea to not only improve your credit score but to get rid of some collateral that you no longer need. This would be something like a secured loan where you can also use a secured loan calculator to determine whether this is the right thing for you.
Annuities can be great tools to help build your retirement income. They are designed to provide you with monthly income. If you prepare properly, an annuity can grow your initial investment, with minimal risk and provide you with a secure source of retirement income. If you fund the account with pre-tax money, you will also have to take taxation into account, since you will have to pay taxes on the monthly income that you receive.
5. Employment or Other-Income Producing Activities
Some retirees plan to still do some sort of work during their retirement. That may include legit online jobs, consulting, or doing freelance projects. Whatever you have in mind, you will need to factor the income into your retirement plan.
If you desire to continue working, your income will help to reduce the amount you need to withdrawal from savings and investments. Thus, allowing that money to grow and last longer. If you have a pension plan, you may be able to receive the benefit from your plan along with your new salary. This will lessen your reliance on your savings and investments even more.
However, if you elected to begin receiving social security benefits, the other income you are earning can have a negative effect on the size of the benefit that you receive.
Putting together the pieces of your retirement income is an extremely important step on the road towards a successful retirement. Unfortunately, taxes and other laws can make figuring out how to make it work very complicated.
At Wealth Guardian Advisory, we are experts at retirement income planning. We can help you prepare a complete picture of your future income and expenses, help you determine if you have reached your goals, and determine if there are any gaps in your plan that need to be filled. We can also help you to discover when to begin withdrawing from your accounts, the optimal time to file for social security, and much more! Let us help you make planning for a successful retirement easy!
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