Turning retirement savings into income

Published 10:37pm Saturday, January 15, 2011

One challenge retirees face is how to replace earnings to fulfill their vision for working less or not at all.

Pre-retirement planning calls for developing a retirement budget and matching income with expenses through a careful financial review. The future by its nature brings uncertainties, and your income planning should account for them. At an average retirement age of 62, retirement could span as much as 25 or 30 years, taking in changes in your life and health, your finances and investment markets. These changes may be difficult to quantify but are important to consider.

While retirement is often referred to as a stage in life, the full span of retirement may actually include multiple stages, each with its own financial impacts. Initially, you and your spouse may pursue travel, volunteering or even part-time work. As you grow older, you may slow down in a second phase and have altered financial requirements. In the later stages of life, health and mobility may constitute a third stage of retirement life.

It is not uncommon for retirees to draw from multiple financial sources whose income streams offer varying financial, tax and regulatory considerations. It can be a challenge to try to evaluate your income streams from Social Security, IRAs and perhaps from pensions and various former employer plans.

For example, when to initiate Social Security payments is one such decision. Each retiree elects when to initiate Social Security payments, whether to defer payments until age 70 for maximum benefits or to accept a reduced payment level at 62 or older.

From a comprehensive review of your financial assets and income needs, an advisor can help determine an appropriate hierarchy of accounts to deliver retirement income in a suitable and tax-efficient matter.

Recognizing when to get professional advice is one of the great lessons that experience teaches in life. Entering retirement is one of those times when it may be wise to seek a trusted advisor to devise and put in place your retirement income strategy.

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