Everyone is familiar with the popular saying “April showers bring May flowers.” The arrival of spring also means the arrival of rainy weather. While rainy days are never fun, they signal the end of winter and the coming arrival of blossoming flowers and warmer weather. In retirement you might be able to avoid rainy weather by moving to a tropical climate.
Of course, you may not be able to avoid rainy days with regard to your financial strategy. Emergencies happen at all stages of life, including after you retire. Taxes could be a challenge and may stretch your budget. Medical expenses and long-term care costs could pose a financial threat. Market risk is always a concern. One way to protect yourself from emergencies and unexpected costs is to boost your guaranteed* income in retirement. The more predictable, guaranteed* income you have, the less vulnerable you’ll be to unplanned costs. Not sure whether you have enough guaranteed* income in retirement? Below is a three-step process you can use to evaluate your income and take action. If you haven’t projected your retirement income, now may be the time to do so. Step 1: Establish your income floor. Your income floor is the minimum amount of income you need to cover your most important expenses. The best way to determine your income floor is to develop a retirement budget. Granted, you can’t predict every cost you’ll face in retirement. However, you can probably make a reasonable projection based on your current expenses and your desired standard of living. Highlight the expenses that are most important. These will include all your fixed expenses, which are the bills that have to be paid every month no matter what. You also may include a few discretionary costs, which are expenses that could fluctuate from month to month. For example, your most important expenses may include:
Total up your most important expenses and see how much they will cost on a monthly basis. Also, don’t forget inflation. It’s likely that prices will rise slightly between now and your retirement date. The sum of your most important expenses is your income floor. That’s the minimum amount of income you need each month to live in retirement. Step 2: Project your guaranteed* income. The next step is to project your guaranteed* income in retirement. Guaranteed* income is cash flow that will last no matter how long you live and that isn’t affected by market performance or other economic factors. Social Security and pension benefits are good examples of guaranteed* lifetime income. The amounts don’t fluctuate from month to month, and the income lasts for life. Distributions from 401(k) plans, IRAs or other investment vehicles may not be guaranteed*, so you don’t want to include them in this calculation. Add up your projected guaranteed* income. Does it exceed your income floor? If so, you have enough to meet your bare minimum expenses. If it doesn’t, you may want to increase your guaranteed* retirement income. Steps 3: Fill in the gaps. Ideally, you don’t just want your guaranteed* income to match your income floor. You want it to exceed your income floor by a substantial amount. That way you can build a rainy day fund to cover life’s unexpected costs. Extra guaranteed* income could help you pay for medical bills, home repairs or other emergency costs. One of the most effective ways to boost your guaranteed* income is to include an annuity in your retirement strategy. Many annuities offer optional riders known as guaranteed* minimum withdrawal benefits. These benefits allow you to withdraw up to a certain amount each year. As long as your withdrawal stays within the limits, the distribution is guaranteed* for life. It doesn’t matter how long you live or how the market performs. Your income remains consistent and predictable. Talk to a financial professional about how to use an annuity to boost your guaranteed* retirement income. They can help you determine your income floor, project your retirement income and take action to protect yourself from financial rainy days. Ready to boost your retirement strategy? Let’s talk about it. Contact us today at Binversie and Associates. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation. *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18686 - 2019/3/25 Comments are closed.
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