Retirement Income Planning

Retirement Income Planning takes some foresight. We've has gotten this far by virtue of our smarts, work ethic, willingness to save for tomorrow, and maybe a little bit of luck. Now it's time to put a retirement plan into action.

Prepare a balance sheet to show your assets versus your liabilities and future obligations. This will give you an ideal starting point. If you own a home that is paid for or on track to be, that's terrific. The average person spends 33% of income on housing expenses. Without a monthly mortgage your cost will be much lower—and your retirement income will stretch farther.

How much do you have in your IRA, 401(k) or other retirement? Depending on your health and life expectancy, you can usually plan on an initial withdrawal rate of around 4%.

If you have other assets such as rental real estate or a small business, what do you expect the net income from those to be? Will you sell them or receive ongoing income? Do you have a government or corporate pension? What will that benefit be?

What is your projected benefit from Social Security? If you don't know, go to to find out. Nearly nine out of ten individuals age 65 and older receive Social Security benefits.

On the expense side, consider your basic living costs. Write them down. Start with fixed expenditures like groceries, utilities, insurance, rent or mortgage, and taxes. Then move on to discretionary outflows like dining out, travel, leisure, and other lifestyle desires. As in your pre-retirement years, it's always helpful to set aside some funds for contingencies like home repairs, healthcare, and surprise expenses. How much might you need for an emergency fund?

Do you have the desire to provide a legacy gift to family members or a charity? If so, this is a good time to consider that possibility. The most tax-wise source of funds is your retirement plan, because it avoids income tax.

Given the seriousness of this planning process (there are no do-overs), it is wise to consider consulting an experienced financial advisor. You will only pass this way once, but your advisor has guided many along the path.