Do you need money from your assets during retirement to maintain your current lifestyle? If you answered yes, then income planning is something you must begin today. The following example illustrates the importance of creating a solid income plan for retirement.
Imagine a scenario where two brothers, three years apart in age, both retire when they are 62 years old. At their respective retirement, both brothers had exactly $1 million in assets and had the exact same investments. They withdrew the exact same amount each year of 5% or $50,000, adjusted for cost of living each year, and lived 30 years in retirement before passing away. This story ends happily for the older brother who retired in 1962 and died 30 years later with a large estate, but unfortunately it does not end as well for the younger brother who retired in 1965 and ran completely out of money 22 years later at age 84.
How can this have happened? Everything was identical other than the year of retirement. In this case, that made all the difference since the older brother experienced positive returns the first couple of years in retirement while the younger brother had losses in his portfolio. It could just as easily been the other way around because both brothers left their retirement in the hands of the stock market’s whims.
When discussing income planning, the main focus needs to be on yourself and ensuring that you will get the income you need until you pass away. Ideally, you would protect the assets that will provide income and grow what is left in case you live past your life expectancy.
Calandra Wealth Management can show you how to protect your principal from losses while guaranteeing income that you cannot outlive. Call the office at (678)302-6621 to develop an income plan that will put you in control.