You’re used to receiving a paycheck, and perhaps you’ve been used to it steadily increasing over the course of your career. You may have experienced what’s known as “lifestyle inflation” and may not plan to downgrade in retirement. Whatever the case, it’s important to know where your retirement income will come from. It could come from several different sources, so know how much will come from each and the total amount.
Social Security benefits are a highly reliable source of retirement income that can last for the rest of your life. While you likely won’t be living only off of your benefit, it’s important to know how much you’ll receive and how you’ll maximize your benefit. You can claim Social Security benefits anywhere from age 62 to 70, but the size of your benefit will vary depending on when you claim. If you want to claim past your full retirement age, your benefit will increase by 8% per year you defer until age 70 for beneficiaries born in 1943 or after. Compare the maximum monthly benefit in 2021 for those who claim at age 62 ($2,324) to the maximum for those who claimed at 70 ($3,895).
If you’ve saved in a 401(k), IRA, or other retirement account for many years, distributions may make up a substantial part of your retirement income. Have a plan for how funds are invested and how you will withdraw them in retirement. While the rule of thumb says to withdraw 4% per year, this is very general advice and may not apply to your specific situation. You can work with us to determine a distribution plan based on your retirement account and unique retirement needs.
If you plan to draw some retirement income from your investments, you may need to reassess your risk tolerance and investment strategy. Beware of sequence of returns risk: Someone retiring during a bear market might see their portfolio recover as the market does, but they will also see a reduction in the overall return of their portfolio because of how much they had to withdraw early on when prices were down. If you have real estate investments, consider if you will continue to receive income from them, if they will appreciate in value, and if you want to remain an active landlord. If you plan to sell a property, consult a professional about the tax and investment income consequences and your options.
While pensions at private companies are no longer the norm, maybe you are lucky enough to have one. Consider if your pension payments will keep pace with inflation, if they would continue to pay your spouse if you passed away, and if you’ll need supplemental retirement income. If you’re being offered a pension buyout, there are many factors to consider, and the right decision is very dependent on the individual situation. We can help you understand all of your options and how to create additional reliable retirement income.
Do you have a plan for creating enough retirement income to maintain your current lifestyle in retirement? Or, are you worried about running out of money in your later years? Epstein & White, we can look at your retirement goals and concerns and create a financial plan for you specifically. Click here to schedule your Click HERE to speak with us.
Please Note: Epstein & White is a tradename. All services provided by Epstein & White investment professionals are provided in their individual capacities as investment adviser representatives of Mercer Global Advisors Inc. (“Mercer Advisors”), an SEC registered investment adviser principally located in Denver, Colorado, with various branch offices throughout the United States doing business under different tradenames, including Epstein & White.Information contained herein is for informational and illustrative purposes only and general in nature. It should not be considered investment advice or a recommendation to buy or sell any type of securities or insurance products and no investment decision should be made based solely on any information provided herein. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas.
Investment in securities carries a risk of loss, including loss of principal amount invested. Different types of investments involve varying degrees of risk. It should not be assumed that diversification or asset allocation protects a portfolio from loss or that such will produce profitable results. An annuity’s guarantee is subject to the claims-paying ability of the issuing insurance company.