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Retirement Income Planning
By: Peter Zomick

Planning your steady stream of retirement income can be a complex puzzle of personal and financial goals and concerns.  Retirement is NOT all about money, but ensuring that you have enough of it for retirement lasting more than twenty or more years in an unpredictable economic environment can be a significant concern for most of us.  So, how do you do this?

Whether our retirement savings are modest or massive, there are challenges for all of us.  For some, the concern is ensuring income to provide for basic needs.  For many, the worry is about having enough income for travel and adventure.  For others, living comfortably and still leaving a legacy is a priority.  It is all relative to the retirement lifestyle that you reasonably expect to achieve.  Many of us are concerned about potentially outliving our money.  So in this sense, aren't we all in the same boat?  Aren't we all subject to the same unpredictable economic storms?  Don't we all need to ensure that our boat does not capsize in the storms that will come, while retaining our ability to take advantage of clear skies?  None of us can accurately predict the "economic weather" over a period of twenty years or more.  We must all be prepared for both bad and good conditions.

There exists many differing and legitimate opinions on the "best" way to generate income from our retirement assets.  For most of us, no single financial product will solve ALL of our retirement income needs.  The strategies that worked while saving for retirement may not work as well during retirement.  The game changes the minute you leave your retirement party.  This game changes because the effect of market volatility changes.  The "ups" and "downs" of the financial markets may now play to your disadvantage.

Some say that Wall Street is a problem.  The financial markets are not "a problem".  They simply are what they are; auction markets that are often driven by events, speculation and emotion.  Markets go up, down and sideways.  It is what free markets do.  The effects of these "ups and downs" have a much greater impact when we are taking income than they do when we are saving.  From a financial standpoint, there are two distinct phases to retirement; the savings phase and the income phase.  For most people in retirement, CASH FLOW TRUMPS INVESTMENT PERFORMANCE.  When saving for retirement, market downturns reduce our assets, but they do not affect our income.  When taking income from our savings, the impact of market downturns can be great.  The storms can capsize us if we are not careful.  Is completely avoiding the financial markets the solution?  Absolutely not.  Especially if we are going to keep pace with inflation.

The effect of volatility is controlled by using risk management strategies that can minimize the effect upon our income.  Using a variety of financial products that let us choose how exposed to risk we are, is often the answer.

Designing an effective retirement income plan is very different that designing a retirement savings plan.  One approach is to ensure that you will always have the income needed to remain comfortable no matter what the "economic weather", while retaining the opportunity for growth and additional income when the "economic seas" are calm. 

A balanced approach to retirement income utilizes two or more different retirement income streams and strategies to balance "required income" and "lifestyle income".  Required income is the income you NEED to remain comfortable such as; housing, food, transport and health.  Lifestyle income is the income you want for fun, family, gifts and adventure.  These two parts comprise your total income.  Income for basic needs and comfort must be reliable and steady for the entirety of your retirement years.  Income for "fun" can be more flexible and fluctuating over your retirement years. 

Defining the gap between your required income and certain sources of income such as social security, pension or other income is necessary to ensure the proper income for retirement.  We seek to guarantee the income needed to close the required income gap so you will always be comfortable.  Once the required income is assured, the income planning process shifts to the lifestyle income.  A less conservative approach can many times be utilized depending on the amount of assets that are available.  While designing an effective retirement income plan it is important that you remain in control of your assets while being prepared for both good and bad economic conditions.

I am available for a free consultation to help develop the right plan for you.  Simply contact me today at 704-509-1141, ext. 201.



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Retirement Income Planning
By: Peter Zomick
   
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