How solid is your retirement income plan? Can it withstand “storms” like a stock market correction or “droughts” like a long period of historically low-interest rates? If not, it may need a more solid foundation.
In fact, there are five “pillars” that should be included in almost any successful retirement plan. Otherwise, it could impact your future lifestyle, and possibly even cause you to run out of money while you still need it.
So, what are these essential financial “stabilizers”? They include:
- Coordination of retirement income sources
- Tax reduction and elimination planning
- Healthcare and long-term care planning
- Legacy planning
Coordination of retirement income sources
While you may work – and receive a paycheck – from one single employer, it is possible that when you reach retirement, your income may be generated from multiple sources. These could include a pension plan, Social Security, reverse mortgage, rental real estate, and/or interest and dividends from personal investments.
If you are married, your spouse may also receive income from one or more sources. So, it is important to coordinate all of these – as well as their start dates – in order to minimize taxes and penalties and maximize the amount of money you have available to spend.
Early in your career you likely invested in financial vehicles that provided the opportunity for growth. Oftentimes, though, these same investments will also pose more risk. So, as you get closer to retirement, you may want to invest more conservatively.
This doesn’t, however, mean that you should completely do without growth opportunities. With that in mind, financial vehicles like fixed indexed annuities – which offer growth and safety – may be an appropriate option…especially because these annuities also provide guaranteed income for a set time period or even for the remainder of our lifetime.
Tax reduction and elimination planning
In retirement, your income may come from both taxable and non-taxable sources. As an example, if you have funds in a traditional IRA (Individual Retirement Account) and/or 401(k), the money you withdraw will be 100% taxable as ordinary income.
This, in turn, can reduce the amount of net spendable income you receive. Planning ahead for this can better ensure that there are no unpleasant surprises – especially as income taxes are likely to go up in the future.
Healthcare and long-term care planning
High health and long-term care costs have the potential to decimate a lifetime of savings. It is estimated that a 65-year-old couple that retired in 2020 will spend close to $300,000 in out-of-pocket healthcare costs – and that does not include the cost of long-term care.
There are several ways to plan ahead for this, such as:
- Medicare Supplement insurance
- Long-term care insurance
- Combination life insurance or an annuity and long-term care coverage
But not all of these solutions will work for everyone across the board. So, it helps to go over all of your options with a specialist in healthcare and long-term care coverage solutions.
When the time comes to leave this earth, how do you want to be remembered? Legacy planning can help to ensure that your property and assets pass to those you intend them to – and that they don’t get stuck in the long and expensive process of probate.
Contrary to popular belief, you don’t have to be wealthy to leave a legacy to the ones you care about. In this case, it is important to work with a competent financial advisor and attorney when constructing your legacy plan.
Is Your Retirement Plan as Strong as It Should Be?
If your current retirement plan has any weaknesses, it’s never “too soon” to build it back up. Working with a retirement income specialist can help. At Annuity Gator, our mission is to educate consumers and financial professionals about how an annuity can provide a lifetime income stream.
So, if you have any questions or would like more information, feel free to reach out to us by phone at (888) 440-2468 or send us an email by going to our secure online contact form. We look forward to assisting you – and helping you to create a plan that can withstand short- and long-term risks.