Why Retirement Income Planning Matters
Saving for retirement and creating retirement income are different financial tasks.
During retirement, accumulated assets may need to support decades of spending. Retirement income planning Tennessee households undertake can help organize where income comes from, when it begins, and how withdrawals interact with taxes and investments.
Start With Spending
A retirement income plan begins with expected expenses.
Separate essential expenses from discretionary spending. This can help identify how much dependable income may be needed and how much spending can adjust over time.
Health care deserves special attention because costs can vary significantly throughout retirement.
Identify Income Sources
Potential sources include:
Social Security
Pensions
Retirement accounts
Taxable investments
Business interests
Real estate income
Other assets
The timing of each source can affect the overall income strategy.
Coordinate Withdrawals
Retirement account withdrawals can have tax consequences. The order and timing of withdrawals should be evaluated alongside Social Security, required minimum distributions, charitable giving, and other income.
ProffittGoodson describes retirement income strategies that consider inflation, health care, timing, and required minimum distributions.
Income Planning and Investment Management
The portfolio and income plan should work together.
If a retiree expects to withdraw money regularly, the investment strategy may need to account for near-term liquidity as well as longer-term growth needs.
The exact approach depends on the retiree's resources, spending, risk tolerance, and goals.
What Happens When a Spouse Dies?
A surviving spouse may face changes in income, taxes, expenses, and Social Security benefits.
This is one reason retirement income planning should consider multiple scenarios, including the financial effects of a major family transition.
Review the Plan Regularly
Retirement income planning is an ongoing process. Tax laws can change. Spending can change. Investment markets fluctuate. Health circumstances may evolve.
A regular review can help determine whether the assumptions behind the income strategy remain appropriate.
Conclusion
Retirement income planning Tennessee retirees undertake should connect spending needs with Social Security, investments, retirement accounts, taxes, and other income sources. A coordinated plan can help retirees evaluate income decisions within the context of their broader financial situation.
FAQ
What is retirement income planning?
It is the process of determining how retirement expenses will be funded using Social Security, investments, pensions, retirement accounts, and other resources.
When should retirement income planning begin?
Many people begin several years before retirement so they have time to evaluate income sources and withdrawal strategies.
Does retirement income planning include Social Security?
Yes. Social Security timing can be an important part of the income plan.
Why are taxes important in retirement income planning?
Taxes can affect the amount available for spending and the timing of withdrawals from different account types.
This material is for informational purposes only and does not constitute legal, tax, or investment advice. Please consult appropriate professionals before making decisions.
DISCLOSURES: The information provided in this letter is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy, or investment product, and should not be construed as investment, legal, or tax advice. Proffitt & Goodson, Inc. makes no warranties with regard to the information or results obtained by third parties and its use and disclaims any liability arising out of, or reliance on the information. The information is subject to change and, although based on information that Proffitt & Goodson, Inc. considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data suppliers (Interactive Data Corporation, Morningstar, etc.). The Market Categories illustrated in this Financial Market Summary are indexes of specific equity, fixed income, or other categories. An index reflects the underlying securities in a particular selection of securities picked due to a particular type of investment. These indexes account for the reinvestment of dividends and other income but do not account for any transaction, custody, tax, or management fees encountered in real life. To that extent, these index numbers are artificial and cannot be duplicated in real life due to the necessity of paying those transaction, custody, tax, and management fees. Industry and specific sector returns (technology, utilities, etc.) do not account for the reinvestment of dividends or other income. Future events will cause these historical rates of return to be different in the future with the potential for loss as well as profit. Specific indexes may change their definition of particular security types included over time. These indexes reflect investments for a limited period of time and do not reflect performance in different economic or market cycles and are not intended to reflect the actual outcomes of any client of Proffitt & Goodson, Inc. Past performance does not guarantee future results.