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How Long Will Your Retirement Income Last?

How Long Will Your Retirement Income Last?

August 03, 2022

When it comes to retirement, there are two things we want to feel confident about; 1) that our retirement income matches what we need and want most out of retirement, and 2) that our retirement savings will last our lifetime and beyond. Easy enough to say, but how do position yourself for a financially successful retirement?

Recent market volatility reminds us that, realistically, there is no way to determine whether you will retire during a period of positive or negative returns. That’s why your financial strategy should include a clear understanding of the various phases of your retirement years and how much monthly income you’ll need during each of those phases. Each phase could be affected by how long you wait before taking Social Security income, when you enroll in Medicare and when you have to take your Required Minimum Distributions (RMDs) from your retirement accounts. The income you’ll need during your early retirement years may differ from what you’ll need mid-retirement.

The return on your investments will also affect your retirement income. You may be familiar with the term “sequence of returns” which refers to a total return over time that impacts the end result. The order in which your investment returns occur and how much recurring income you are taking may determine whether you deplete your retirement savings or outlive them. For example, a sequence of negative returns combined with systematic withdrawals can potentially wipe out your portfolio unless your assets are allocated in a way that tempers this risk. This can be done by including a base of predictable income sources with no exposure to market risk along with investments that provide greater growth potential for future use.

We believe that using a time-segmented approach to create inflation-adjusted retirement income can help mitigate risk during times of negative returns and help ensure that your retirement plan and your money will last a lifetime.

For more information on preserving wealth and creating a sustainable retirement income strategy, please call our office at 609-216-7440.