WiserAdvisor – Blog

Main Menu

  • Main
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Investment Management
  • More
    • Personal Finance
    • Estate Planning
logo
Header Banner

WiserAdvisor – Blog

  • Main
  • Financial Advisor Guide
  • Financial Planning
  • Retirement Planning
  • Education Planning
  • Investment Management
  • More
    • Personal Finance
    • Estate Planning
Retirement Planning
Home›Retirement Planning›The Ultimate Guide on How to Craft a Retirement Income Plan

The Ultimate Guide on How to Craft a Retirement Income Plan

By WiserAdvisor Insights
September 16, 2019
864
0
Share:
Retirement-Income

Last Modified on September 17, 2019

Contrary to popular belief, an income is not just limited to your pre-retirement days. It is also an essential part of your life post retirement. You spend all your life, saving your money in different types of retirement accounts and schemes. Every account or investment has a different rate of interest, maturity period, tax benefit, and risk factor.

Retirement income planning gives you a clear picture of how much money you have saved up, precisely where your retirement income comes from, and how much of it can be lost to taxes. Many people live under a false illusion of financial security without realizing that a sizeable amount of their savings can vanish away in taxes and penalties if their withdrawals are not well planned. 

Table of Contents

  • Guide to Prepare a Retirement Income Plan
    • 1. Keep a note of all the sources of potential income
    • 2. Analyze the risk for each investment
    • 3. Include all other unforeseen factors
    • 4. Consider flexibility and accessibility
    • 1. Expenses
    • 2. Income
    • 3. Find the difference
    • To sum it up

Guide to Prepare a Retirement Income Plan

1. Keep a note of all the sources of potential income

Your retirement income is not just limited to individual retirement accounts (IRA), 401 (k)s, and savings accounts. Think of all the potential sources of income that you wish to liquidate during retirement. For example, the property that you bought with the intention of reselling. Try to estimate the value of all your resources at the time of retirement and note down this figure. 

2. Analyze the risk for each investment

Are you saving your money in a Certificate of Deposit (CD), or are you aggressively investing in the stock market? Bank savings accounts and retirement accounts like IRAs and 401 (k)s offer a safe and assured interest on your earnings. However, if your investment portfolio is largely dependant on the stock market, you are at a higher risk. Make a list of these sources. If you have some risky investments in your portfolio, try to balance the risk with some relatively safe and assured savings accounts. 

3. Include all other unforeseen factors

This includes life expectancy, inflation, investment returns, etc. Try to keep space for some ‘worst-case scenarios’ as well. A good example here would be inflation. What if you prepare for an inflation of 2% but instead get to see an inflation of 4% in the future? It is good to be mentally prepared for unexpected costs. Make sure to save extra so that you are able to cover such costs with your retirement income. 

4. Consider flexibility and accessibility

One of the most important things to consider in your plan is the flexibility and accessibility of your money. Your savings should be easily accessible to you without generating penalties and tax liabilities. For example, while real estate is a great financial cushion, it is not an immediate source of income. Many retirement accounts set off penalties if drawn before a certain age. Keep these factors in mind. 

Now that you have made a note of these points, the next step is to determine the age when you wish to retire. Your retirement age can affect your Social Security benefits, Medicare, and withdrawals from other accounts.

Now take a piece of paper or open an excel sheet and follow these steps to draft your retirement income plan:

1. Expenses

Allot the first column to expenses. Include costs like mortgage, loan EMIs, insurance premiums, etc. It is also essential to calculate the time for each of these expenses. For example, you may have three more years left to pay off a car loan, but four more to pay off mortgage. Put these statistics in the expenses column.
Make sure to also calculate the taxes on your retirement account and add them to this column. Your tax liability will depend on your retirement accounts, Social Security benefits, etc. Consult a financial advisor to chalk out an estimate of your yearly taxes. 

2. Income

As discussed above, make an estimate of all your possible sources of income during retirement. This can include your required minimum distribution (RMD) from retirement accounts, returns from bonds and stocks, and Social Security benefits. If you have inherited your spouse’s retirement account, include that as well. 

3. Find the difference

The difference between your income and expenses will give you a clear picture of your post-retirement financial requirements. If the result is negative, then you are falling short of your retirement goals and need to look at other ways of increasing your income. This can be done by increasing your contribution to retirement accounts or investing rigorously in high yielding stocks.

If the result is positive, then you have little to worry about, as you have met your desired retirement goals. Depending on your score, you can also decide to increase your expenses.

If the above math seems difficult, you can also use a calculator to see if your current savings are sufficient for retirement.

To sum it up

Nobody can foresee the future, but everybody can follow a simple philosophy, ‘precaution is better than cure’. 

There are many factors that can completely alter your retirement income plans. For example, inflation, change in federal and state policies, etc. However, preparing for these fluctuations and keeping a safety cushion in your plan can help you in many ways. When you make a retirement income plan, it is also important that you take into consideration which state you want to retire in. Pick a state that offers a low cost of living, so your financial plans don’t take a massive hit with probable future inflation. 

Retirement income planning is not hard, but it does require you to consider every minute detail of your finances. Do you need help in calculating your retirement income? Reach out to financial advisors and let them devise the most ideal plan for you. 

Tags#financial advisorFinancefinancial planningRetirement Incomeretirement planning
Previous Article

Here’s All You Need to Know about ...

Next Article

How to Avoid a False Sense of ...

0
Shares
  • 0
  • +
  • 0
  • 0
  • 0
  • 0
WiserAdvisor Insights

WiserAdvisor Insights

A team of dedicated writers, editors and finance specialists sharing their insights, expertise and industry knowledge to help individuals live their best financial life and reach their personal financial goals. We believe that there is no place for fear in anyone's financial future and that each individual should have easy access to credible financial advice.

Related articles More from author

  • Preserve-Wealth
    Financial Planning

    10 Strategies for Preserving Your Wealth

    April 7, 2021
    By Jonathan Dash
  • College-Funds
    Education Planning

    College Funds and Asset Allocation

    December 9, 2019
    By WiserAdvisor Insights
  • Retirement-Corpus
    Retirement Planning

    How to Find the Right Withdrawal Rate from Your Retirement Corpus?

    October 27, 2019
    By WiserAdvisor Insights
  • Financial Goals
    Financial Advisor Guide

    How Do Financial Advisors Track and Monitor Your Financial Goals

    May 4, 2021
    By WiserAdvisor Insights
  • Realistic Financial Plan
    Financial Planning

    7 Tips to Track your Spending for Creating a Realistic Financial Plan

    October 12, 2020
    By WiserAdvisor Insights
  • Risk-Profile-on-Investment
    Financial Planning

    Impact of Your Risk Profile on Investments

    February 10, 2020
    By WiserAdvisor Insights

You might be interested

  • Health Insurance in Retirement Planning
    Retirement Planning

    How to make Health Insurance part of your Retirement Planning

  • Financial Advisor
    Financial Advisor

    Who Are Financial Advisors and What Do They Do?

  • 6 Questions on Sustainable Investing That You Need to Ask Your Financial Advisor
    Investment Management

    6 Questions on Sustainable Investing That You Need to Ask Your Financial Advisor

Don't miss out! Get our Helpful Financial Tips Newsletter

  • Popular Posts

  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • Do's & Don't investment portfolio

    The Dos and Don’ts to Protect your Investment Portfolio in a Bear Market Amid The ...

    By WiserAdvisor Insights
    April 22, 2020
  • retirement-accounts

    Choosing the Best Retirement Accounts

    By WiserAdvisor Insights
    July 8, 2019
  • Retirement-Planning

    Retirement Planning checklist

    By WiserAdvisor Insights
    July 8, 2019
  • Why investing for goals is the right way of investing

    Why Investing for goals is the right way of Investing?

    By WiserAdvisor Insights
    July 16, 2019
  • Portfolio diversification

    5 Dangers of Over-Diversifying your Portfolio

    By WiserAdvisor Insights
    July 26, 2019
  • Financial Planning for couple

    The Complete Guide on Financial Planning for Couples

    By WiserAdvisor Insights
    August 1, 2019

Categories

  • Business Finance (2)
  • Education Planning (29)
  • Estate Planning (20)
  • Financial Advisor (1)
  • Financial Advisor Guide (27)
  • Financial Planning (112)
  • Investment Management (54)
  • Personal Finance (9)
  • Portfolio Management (1)
  • Retirement (9)
  • Retirement Healthcare (1)
  • Retirement Planning (79)
  • Retirement Plans (1)
  • Uncategorized (2)

The blog articles on this website are provided for general educational and informational purposes only, and no content included is intended to be used as financial or legal advice. A professional financial advisor should be consulted prior to making any investment decisions. Each person's financial situation is unique, and your advisor would be able to provide you with the financial information and advice related to your financial situation.

WiserAdvisor is America’s oldest and largest independent network of screened financial advisors. We make it easy and convenient for consumers to find and connect with advisors in their area. We have successfully helped over 100,000+ individuals find their best financial advisor since 1998 with no match fees, no commitments, no obligation, and complete confidentiality. WiserAdvisor has been featured in The Washington Post, The Washington Journal, ABC, CBS, Yahoo and has been seen in numerous other leading financial news and information websites.

Follow Us

  • Recent

  • Popular

  • Financial Planning for Entrepreneurs

    Financial Planning for Entrepreneurs

    By WiserAdvisor Insights
    July 1, 2022
  • Financial Planning for a Baby

    Financial Planning To Prepare For a New Child

    By WiserAdvisor Insights
    June 20, 2022
  • Lower Your Financial Advisor Fees

    How to Lower Your Financial Advisor Expenses

    By WiserAdvisor Insights
    June 13, 2022
  • The benefits of working with a financial advisor - WA

    The benefits of working with a Financial Advisor

    By WiserAdvisor Insights
    July 16, 2019
  • Financial-Professional

    How to prepare for a meeting with your Financial Advisor

    By WiserAdvisor Insights
    July 8, 2019
  • Do's & Don't investment portfolio

    The Dos and Don’ts to Protect your Investment Portfolio in a Bear Market Amid The ...

    By WiserAdvisor Insights
    April 22, 2020

Contact Us

Corporate Headquarters

12150 Monument Drive, Suite 700
Fairfax, VA, 22033

Business Hours

8:30 AM – 5:00 PM EST (Monday – Friday)

Email Address

wa.assistance@wiseradvisor.com

Phone Number

(703) 651-2060

Fax Number

(703) 259-4487

  • Privacy Policy
  • Terms & Conditions
© Copyright 2021 WiserAdvisor.com. All Rights Reserved.

Add WiserAdvisor - Blog to your Homescreen!

Add