{"id":2284,"date":"2022-07-15T17:53:00","date_gmt":"2022-07-15T17:53:00","guid":{"rendered":"https:\/\/mgfs.net\/?p=2284"},"modified":"2022-08-19T18:30:26","modified_gmt":"2022-08-19T18:30:26","slug":"guided-retirement-income-planning-chapter-5","status":"publish","type":"post","link":"https:\/\/mgfs.net\/blog\/guided-retirement-income-planning-chapter-5\/","title":{"rendered":"Guided Retirement Income Planning: Chapter 5"},"content":{"rendered":"\t\t
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Barry and Adam wrote and published the book \u201cGuided Retirement
Income Planning\u201d in November 2020 to create higher levels of financial
literacy and to show a comprehensive and logical process for executing
income planning in retirement. Since we believe that this subject matter is
so important and relevant, we are going to roll out one chapter each
month. While our approach and philosophy will remain consistent in every
economic cycle, customization for each household will vary.
We want to emphasize that some of you are not close to retirement and it
is never too early to plan. You may also have loved ones, friends, or
colleagues that are in need of help. We would be pleased to send them a
complimentary copy of our book. We simply hope to help as many people
as possible. As we present these chapters, we invite you to circle back to
us with any questions or concerns about the content and how it relates to
you.
Please enjoy Chapter 5 below!\u00a0<\/p>

Regards,<\/p>

Your Partners with MGFS<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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CHAPTER 5\u00a0<\/span><\/h3>

PUTTING TOGETHER A RETIREMENT INCOME PLAN<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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\u201cWe must consult our needs rather than our wishes.\u201d (George Washington)<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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A well-designed retirement income plan is a critical process that will help
you prepare for retirement. It does not happen in a vacuum and can be
difficult to create. This process of putting together a retirement income
plan is orderly and systematic. It can be tedious, complex, and
overwhelming. You will need to adjust your thinking because, as stated
earlier, accumulating wealth while you are working is a different mindset
than taking distributions.\u00a0<\/p>

Retirement planning should be customized and unique to your household.
When to get started is also dependent upon your circumstances. The
biggest advantage to starting early, say five or ten years prior to
retirement, is that you can start to make intelligent and well-informed
decisions to help turn your dreams into reality. Proper planning not only
includes investment considerations but also extends to relevant risk
management and tax strategies. Some considerations to increase your
retirement readiness:\u00a0<\/p>

  • Risk management strategies related to life, disability, homeowner\u2019s
    and liability insurance coverages\u037e wills and trusts.\u00a0<\/li>
  • Long-term care coverage when one is healthy and able to afford it.
    Long-term savings with qualified retirement plans and after-tax
    accounts.\u00a0<\/span><\/li>
  • Tax exempt or tax favorable strategies such as Roth accounts, Roth
    conversions, cash value life insurance, and annuities.\u00a0<\/span><\/li>
  • Employment decisions related to pensions, employee benefits, and
    portability.<\/span><\/li><\/ul>

    \u00a0So where should you begin? Retirement income planning is goal and
    budget-based and is about having a plan to convert assets into income
    and making it last as long as needed. It\u2019s about managing through risks,
    uncertainty, and turbulent times and being able to make proper
    adjustments along the way. First and foremost, you will need to consider
    what is most important as you enter retirement. From there, it\u2019s about
    identifying the obstacles and possibilities, and the best way to implement
    the plan with continual monitoring. Following is an outline of the specific
    steps to create a retirement income plan (see Guided Retirement Income
    Plan Flowchart \u2013 chart 5.1). Subsequent chapters will expand on each of
    these steps.<\/span><\/p>


    Step 1 \u2013 Determine retirement goals \u2013 <\/b><\/span>There are many qualitative
    questions that require significant thought and soul searching. Here are a
    few:
    <\/span><\/p>

    • What is your vision for retirement?<\/span><\/li>
    • What are your retirement goals, expectations, and objectives?<\/span><\/li>
    • What is the anticipated timeline for retirement and what needs to<\/span><\/li>
    • happen before retirement?<\/span><\/li>
    • Do you have a plan to transition into retirement?<\/span><\/li>
    • What emotional and personal factors should be considered?<\/span><\/li>
    • Will you have financial, logistical, and even physical obligations to<\/span><\/li>
    • help a loved one?<\/span><\/li>
    • Will you be relocating and if so, will this be closer to or farther from<\/span><\/li>
    • family?<\/span><\/li>
    • Is downsizing a home or moving into a retirement community<\/span><\/li>
    • important?<\/span><\/li>
    • What are your biggest fears leading into retirement?<\/span><\/li>
    • What are your biggest priorities \u2013 travel, multiple residences, a new\u00a0<\/span>career, going back to school, consulting, part-time or volunteer\u00a0<\/span>work…?<\/span><\/li><\/ul>

      Please see the Retirement Planning Survey in the appendix as an
      expanded resource to help you identify your goals.<\/span><\/p>

      Step 2 \u2013 Evaluate your current financial situation<\/b><\/span> \u2013 In other words,<\/span>
      assess your financial net worth – your assets and liabilities\u037e cash flow<\/span>
      reflecting income sources and expenses need to be inventoried and<\/span>
      categorized. Do you have a pension or have you created one for earlier<\/span>
      or later use in retirement? Have you considered your best options with<\/span>
      social security?<\/span><\/span><\/p>

      Step 3 \u2013 Preliminary calculation <\/b>\u2013 This is a preliminary forecast of<\/span>
      income needs and expenses to determine if there are any projected<\/span>
      income shortfalls. A rough monthly budget will be necessary to start the<\/span>
      planning process. Categorizing these expenses into needs (essential<\/span>
      spending) and wants (discretionary spending) is highly encouraged. All<\/span>
      income and potential income sources are factored in, as well. The object<\/span>
      is to get a quick snapshot of your cash flow to determine if retirement can<\/span>
      be properly funded or if there are shortfalls that need to be addressed.<\/span>
      Retirement income software is very helpful to forecast and stress test<\/span>
      future cash flows. The software projections should incorporate the<\/span>
      following: how much income is needed, ages of retirees, projected life<\/span>
      expectancy, inflation, taxes, target long-term investment returns, and<\/span>
      should simulate the impact of market volatility. The software data can be<\/span>
      modified to change the variables, which in turn, will change the results.<\/span>
      Why is this important? Life is about choices. One choice can impact<\/span>
      another. Seeking certain lifestyle priorities beyond minimum spending<\/span>
      needs may alter outcomes elsewhere in your plan. It is important to note<\/span>
      that such projections serve as a benchmark to make sound financial<\/span>
      decisions. If there is a shortfall in the plan, it is better to know right away<\/span>
      and take corrective action early.<\/span><\/span><\/p>

      Step 4 \u2013 Identify retirement risks <\/b>\u2013 There are many risks that could<\/span>
      derail a retirement income plan. For example, how do you define risk? Is it<\/span>
      seeing your assets fluctuate in value, not being able to buy things in years<\/span>
      to come for the same price as you can today, or is it outliving your<\/span>
      money? Later, we will address these risks in more depth. The important<\/span>
      concepts to understand are that there are numerous strategies and<\/span>
      management techniques to address these risk factors\u037e it is important to be<\/span>
      open and honest about potential risks, and to recognize the biggest<\/span>
      concerns so that they can be addressed with suitable solutions.<\/span><\/span><\/p>

      Step 5 \u2013 Convert assets into income<\/b> \u2013 There are three standard<\/span>
      approaches to convert assets into a sustainable income plan. One or more<\/span>
      of them will hopefully be implemented prior to entering retirement\u037e<\/span>
      systematic withdrawals, bucketing, and flooring. We will review these<\/span>
      approaches in greater detail in Chapter 11. Whether one or a combination<\/span>
      of the approaches is used, the sequence of withdrawals should be<\/span>
      optimized within the plan because social security and pension timing need<\/span>
      to be factored into the calculations. After completing these steps, the plan<\/span>
      can be modeled again using retirement income software to forecast and<\/span>
      stress test it under different market conditions and personal scenarios.<\/span><\/span><\/p>

      S<\/b>tep 6 \u2013 Weigh alternative asset allocations and strategies <\/b><\/span>\u2013 Evaluate<\/span>
      different investments, risks, portfolio management approaches, and then<\/span>
      payoffs. This is where you start to narrow down the options!<\/span><\/span><\/p>

      S<\/b>tep 7 \u2013 Decide on a plan<\/b><\/span> \u2013 Choose a plan that addresses the most<\/span>
      important concerns and feels comfortable.<\/span><\/span><\/p>

      S<\/b>tep 8 \u2013 Execute the plan<\/b><\/span> \u2013 Simply stated, put it into action!<\/span><\/span><\/p>

      Step 9 \u2013 Periodically review and revise the plan<\/b> \u2013 Identify how the plan
      should be reviewed and how often this should be accomplished.<\/span><\/p>

      These steps seek to provide comfort and confidence in order to transition
      from work to retirement without the financial, mental, or emotional anxieties
      that others may experience without a plan. Being prepared for retirement
      will enhance your excitement and happiness. At the end of the day, isn\u2019t
      that the ultimate goal for retirement?<\/span><\/p>

      \u00a0<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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      Words of Wisdom on Life
      <\/b> <\/span>At age 20, we worry about what others think of us. At age 40, we don\u2019t care what they think of us. At age 60, we discover they haven\u2019t been thinking of us at all. (Ann Landers)<\/i><\/p>\n

      <\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

      Barry and Adam wrote and published the book \u201cGuided RetirementIncome Planning\u201d in November 2020 to create higher levels of financialliteracy and to show a comprehensive and logical process for executingincome planning in retirement. Since we believe that this subject matter isso important and relevant, we are going to roll out one chapter eachmonth. While our […]<\/p>\n","protected":false},"author":2,"featured_media":2285,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/posts\/2284"}],"collection":[{"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/comments?post=2284"}],"version-history":[{"count":7,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/posts\/2284\/revisions"}],"predecessor-version":[{"id":2294,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/posts\/2284\/revisions\/2294"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/media\/2285"}],"wp:attachment":[{"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/media?parent=2284"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/categories?post=2284"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mgfs.net\/wp-json\/wp\/v2\/tags?post=2284"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}