Planning For Income In Retirement
Not everyone who retires has a traditional plan. We who are planning to take an income for our retirement accounts face a special set of issues. At Latitudes, we understand and have developed our "Income For Life Model" to help retirees seek to create a lifetime income.
A "perfect storm" has emerged comprised of low interest rates, volatile stock markets and unprecedented longevity.
These realities are sure to create stress for many retirees as they seek ways to make their retirement income last as long as they do. With fewer companies providing traditional pension plans, retirees are being forced to assume the investment risk associated with their retirement assets. They have more control than ever before, but they also face more risks.
Widespread uncertainties about the future of Social Security continue to linger. Increasing budget deficits and general financial uncertainty only serve to create additional anxiety for retirees. In addition, interest rates are at levels not seen since the Eisenhower administration. This has reduced the potential current income gained from savings vehicles.
Many retirees are thus challenged to find ways to boost levels of current income without taking on undue risk. All of these factors combine in a way that causes retirees to seek investment choices that offer low risk but also provide growth opportunities to pursue their income needs today, and tomorrow.
Three BIG risks that can potentially devastate retirement are:
01. What if I pick a bad year to retire?
02. Will my income keep pace with rising prices?
03. Will my income last my entire lifetime?
Many factors make it challenging to plan for retirement income.
Historically low interest rates have slashed savers' interest income.
Individuals have been provided more control over how they save for retirement and create retirement income. But according to actuarial consulting firm, Milliman, they may "...not have the knowledge, expertise, or guidance to make those decisions."
People are living longer. This creates the need to plan for a long retirement.
The outlook for inflation is uncertain. Higher inflation make prices increase, so retirees need more income to stay even.
Ever-increasing health care costs make planning for retirement security a must.
Emotions impact investors' decision-making. People can easily lose their long-term focus at a time when maintaining a long planning horizon is critical.
The Income for Life Model® places emphasis on both the present and future income needs of retirees. It's central objective is to provide an inflation-adjusted income for life.
One popular approach is to allocate your deposit to six "segments" that will hold invested assets ranging from very conservative to aggressive. Segment one, the most conservative, receives the largest portion of your deposit - 28%. Successive segments receive 26%, 20%, 13%, 7% and 6% (total, 100%).
The segments receiving the smallest amount of money are those which hold progressively more aggressive assets. The more aggressive an investment, the more risk it is subject to. These segments will be held for the longest period of time in order to pursue investing results.
I've studied the research and science behind the Income For Life model, and if you visit my Retirement Time Website you can get a lot more information, including a twenty minute movie about planning for your retirement:
Click On The Button For More Information on The Income For Life Model
At Latitudes, we literally wrote the book on retirement income (The Retirement Dilemma, Rick DiBiasio CFP Author) and we would love to talk to you about a risk adjusted retirement plan for you!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This is a hypothetical example and is not representative of any specific situation. Your results will vary. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to effect some of the strategies. Investing involves risks including possible loss of principal.