By Joe Arnold, AIF®
Preparing for retirement takes much more than just contributing a percentage of your income to your 401(k) and hoping you’ll have enough money when you decide to leave your career days behind. Truth be told, socking money away is only half the battle. Thankfully, you don’t have to go it alone. We have a time-tested income planning process that we walk our clients through so they can retire with confidence. Here’s how it works.
1. What Is Your Real Need?
This question seems so simple, yet it is often overlooked. Do you even know how much income you will need in retirement? Before you can develop a plan for your retirement income needs, you need to have a goal and settle on the destination to which your plan will lead you.
As you build your budget, organize it based on needs. Every single expense should be identified as either fixed or variable and essential or non-essential. For example, your housing expenses are likely fixed and essential. Food is essential, but it is a variable expense. A gym or country club membership may be fixed, but it is non-essential. Other forms of leisure or travel are likely variable and non-essential.
Knowing which expenses are necessary and which are flexible can give you incredible peace of mind. If you’re used to spending $8,000 a month, once you sort your expenses and discover that only $4,500 of them are truly necessary, it relieves a lot of pressure.
2. What Income Sources Do You Have?
Once you know your goal, you need to take stock of the tools available to get you there. What income sources do you have? This could be anything from Social Security and pensions to annuities, rental income, or taxable brokerage accounts. It is important to analyze your alternative income strategies and review the cost benefits of each choice of potential income elections.
3. What Are The Tax Implications?
Having clarified the different income sources available to you, it is important to understand the tax implications of each one. You may have some accounts that are pre-tax and others that are post-tax, and then there is Social Security, which is taxed based on how much total taxable income you have. It is critical to review the tax status of your accumulated assets in order to develop a tax-efficient income strategy.
Into Action…
You’ve worked hard for decades and been diligent with your finances to get you where you are today. Now that it is time to start thinking about drawing from your hard-earned resources, you need to have a plan in place to protect them in the coming years. Having a disciplined process can help reduce the impact of short-term market volatility on your income and preserve your wealth for the rest of your life and the generations to come.
It’s hard to figure out how much income you need and the best way to go about using it in retirement. Many people in your situation find that it’s helpful to work with a financial professional who can help you develop a comprehensive plan for your income needs in retirement. If you are ready to put a plan in place, give me a call or send me an email and we’ll get started.
Did You Know We Work By Referrals…
We know you want your friends and family to succeed financially too, so we want you to know that they are welcome to reach out as well.
Our business is different from other businesses in a few ways, but perhaps one of the main differences is how it grows. Simply put, our business runs on referrals, and we are grateful for them. We’ve been fortunate to work with a wide range of clients who show their confidence in us by referring their friends, family, and colleagues to our firm.
If you’re a client, and you’ve enjoyed working with us, I hope you’ll refer a friend, colleague, or family member who may benefit from my services. You can also pass along this article to your friends and family and let them know I’m happy to speak with them if they have any questions. Schedule a complimentary appointment by calling (440) 899-7535 or emailing me at jarnold@foundationwa.com.
About Joe
Joe Arnold is an independent financial advisor and the founder and president of Foundation Wealth Advisors, LLC, an independent firm whose advisors provide private investment management for individuals and families, as well as retirement plan consulting for small and mid-sized businesses. With 20 years of experience in the financial industry, Joe specializes in providing objective advice to individuals, as well as transparency in building and managing company 401(k) retirement plans. He is committed to putting his clients’ best interests first in all decision-making and recommendations. Based in Westlake, Ohio, he serves clients in the Cleveland, Akron, and surrounding areas, as well as throughout the country. Joe received a bachelor’s degree in business administration from Cleveland State University and is an Accredited Investment Fiduciary® (AIF). He has been featured on national television, including CNBC and FOX Business, and quoted in various publications, including The Wall Street Journal, CNN Money, Forbes, and others. Joe lives in Rocky River, Ohio, with his wife, Allison, and their two grown children, Kevin and Keira. An avid golfer, he is a former Class A PGA of America teaching professional and NCAA Division 1 athlete. When he’s not working, he enjoys playing golf, reading, and honing his culinary skills. To learn more about Joe, connect with him on LinkedIn.