Planning for a Robust Retirement Income

People are living longer than ever!  Unfortunately, many will experience severe financial limitations during retirement.  Others will run out of money long before they die.  Sound fun? 

The good news is that retirement need not follow that script…if you prepare now.  Here are several strategies that will help ensure that you enjoy a more robust income during retirement. 

One:  Create a plan!  Most people lack a formal retirement plan.  As such, they labor under false and dangerous assumptions.  For example, some individuals assume they’ll be able to safely withdraw ten percent of their retirement balance annually, when, in fact, most planners believe that four percent is acceptable.  Start with an honest assessment of your current situation and future needs.  Talk to a financial planner! 

Two:  Ruthlessly reduce debt!  It’s really very simple:  you’ll need far less income during retirement if you eliminate your debt load beforehand.  Start now and pay down your mortgage and, by all means, eliminate credit card balances.  By having minimal recurring debt, your income will stretch further. 

Three:  Plan for healthcare needs and expenses!  Healthcare costs are always substantial and often unpredictable.  Out-of-pocket costs can easily exceed $11,000 annually, and there’s a better than even chance that a long-term disability is lurking in your future.  As such, healthcare expenses are the single greatest threat to your retirement plan.  So, do the following: 

  • Create a separate account for healthcare to be used during retirement, and generously fund it now. 
  • Seriously consider purchasing long-term care insurance.  It’s less expensive than you may think, and it will serve as your first line of defense against impoverishment. 
  • Fund your HSA account now, but don’t use the money until you retire. 

Four:  Save until it hurts!  National statistics tell us that most people have saved far too little for retirement.  The good news is that it’s never too late, and one can never save too much.  If you are able to participate in your employer’s 401(k) plan, that’s a perfect place to start.  This year you can contribute up to $16,500…$22,000 if you’re over 50! 

Five:  Pay attention to income tax considerations…present and future!  Don’t automatically limit your options to pre-tax savings as found in a traditional 401(k).  Consider Roth and other after-tax savings vehicles…including the Roth 401(k) option in your employer’s plan.  By wisely utilizing both, you’ll have greater income tax flexibility after you retire. 

Six:  Work with an experienced advisor.  Planning for retirement is complicated and time consuming, so consider utilizing the services of a qualified, experienced advisor.  He or she will be able to guide you through ‘the maze’ as you develop a plan that addresses your needs. 

Some people say money can’t buy happiness, but I think Jane Austen may have been right when she famously said, “A large income is the best recipe for happiness I ever heard of.”


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