A Guide to Retirement Income Planning

If you’re intimidated by retirement income planning, you’re not alone. Here’s what you need to know about creating your nest egg and investing for retirement.
News Photo

Even if you still have decades left to go in your career, retirement income planning isn’t something you can afford to ignore for very long. These days, anxieties about retirement even transcend politics—62% of Republicans and 70% of both Democrats and Independents believe the United States is in the midst of a retirement crisis.


Despite this, you don’t need to panic about your financial situation. Instead, we recommend that you put together a solid retirement plan. Here, you’ll find a brief guide to the world of income planning for your golden years.


How Much Retirement Money Do You Need to Retire?


Before making any other decisions related to retirement income planning, you need to know how much money you’ll have to work with. By its very nature, planning for your retirement means thinking in the long term—and the countless variables associated with longevity and income needs make it impossible to create a perfect plan.


Even so, you can still come up with a solid estimate of what your finances will look like after you retire. To figure out how much cash you’ll need for retirement, you should:


Figure Out How Long Your Retirement Will Probably Last


To roughly determine the length of your retirement, you’ll need to consider two main factors: when you plan on retiring and how long you expect to live. Of course, the latter factor will be much harder to estimate than the former. Your best option is to make an educated guess based on your family medical history and any other relevant information.


Consider What Your Annual Expenses Will Be During That Time


Once you know roughly how long of a period you’re budgeting for, you can start looking at your annual expenses. Common expenses in retirement include:

  • Cost of living. Even during retirement, you’ll need to be able to cover groceries, housing, taxes, and other mundane expenses.
  • Travel. Retirement is an excellent time to see the world—if you have the money to do so.
  • Medical expenses. Aging naturally comes with the risk of health problems, so it’s wise to plan ahead and set aside some money to help you deal with these issues.
  • Family-related costs. You might find yourself supporting elderly parents, a disabled spouse, or adult children/grandchildren coming “back to the nest” during your retirement.

Even when you aren’t working full-time anymore, you may be able to offset some of these expenses with revenue sources such as:

  • “Second-act” careers. These jobs are unlikely to bring in as much cash as your former career. Still, they can be an excellent opportunity to explore your interests while making some money on the side.
  • Any businesses you own. Depending on your own wants and needs, you could sell your companies or keep receiving income from them upon retirement.
  • Guaranteed income. Annuities, pensions, and Social Security can make it easier to deal with everyday costs.


Decide What You’d Like to Leave Behind for Loved Ones


Once you have a complete picture of your expenses (and income sources), it’s time to turn your attention to what you’d like to provide for your family. Depending on your unique situation, this could take the form of an inheritance, an education fund, or an entirely different type of financial gift.


Combine This Information to Find Your Nest Egg Goal


By putting everything listed in this section together, you can estimate your ideal retirement funding goal. To calculate this, start by taking your expected annual retirement expenses in today’s dollars and discount them by a reasonable rate of inflation for the number of years until your expected retirement date. Upon arriving at the required amount needed to fund year one of retirement you will then increase by the annualized rate of inflation for the remaining life expectancy in retirement. From there, add any financial gifts you hope to leave behind to get your total nest egg target.


What’s the Best Way to Start Building Your Retirement Fund?


Now that you know how much you want to save for retirement, it’s time for the hard part actually— saving this money. Following the steps listed below should make it easier for you to accomplish your financial goals.


Pick the Best Retirement Plan for You


If you don’t already have a retirement plan in place, the best way to start is to find out what your workplace has to offer. Ask your employer if they provide retirement planning options, if you already have access to one or more of these options, and whether they will match your contributions up to a predetermined amount.


Are you ineligible for a workplace retirement plan or self-employed? In that case, a financial advisor could help you pick the right retirement savings account for you.


Choose the Best Investment Options for You


Most retirement accounts come with various investment opportunities, and exploring these options thoroughly is a good idea. Your current age and overall circumstances will be major factors that will help you determine your risk tolerance. Generally speaking, the closer you are to income distributions from your retirement savings the greater the need to minimize unnecessary volatility within your portfolio. If you need advice on the best investment strategy for you, talk to your financial advisor.


Let’s Find a Time to Chat About Your Retirement Income Plan


Whether you’re close to retirement age or are just thinking ahead, there’s no time better than now to take retirement income planning seriously. However, you shouldn’t make any big decisions about your financial future without input from a qualified financial advisor.


That’s where our team, Laurel Highlands Wealth Advisory Group at Janney comes in. When you choose us to share advice on your retirement investment strategy, you’ll benefit from our financial expertise and get answers to all your burning questions—without having to deal with meaningless buzzwords or aggressive “suggestions.” To set your mind at ease during the retirement planning process, schedule a time to get together with us today!

Preferred Communication Method
Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals.