Everything You Need To Know About Income Planning for Retirement

Income planning for retirement sounds intuitive. Yet many Americans go without a solid plan. One-third of Americans have no plan of any kind, and only one-third of Americans who do plan have more than 100,000 dollars saved. 

If you haven’t, you should start making monthly retirement savings. But don’t just set some money aside in a bank account.

Get a detailed plan in place. Consider your various options to save money so you can spend decades in retirement. Here is your quick guide. 

A Plan for Retirement

You should set a goal for when and how you want to retire. Many people want to work beyond 65, the standard retirement age.

If you’re comfortable doing that, you should. This will give you more time to save money and decide what you want to do after you leave work. 

To start planning for retirement, you should look into what employer-sponsored plans you can place your money into. A 401(k) account is the most common option. 

But you also choose a 403(b) or 457(b) plan. A 403(b) plan is for employees of tax-exempt organizations, with employers matching their employee’s contributions. A 457(b) plan is for local and state government employees, and it involves contributions taken from pre-tax income. 

Start saving money as soon as you can. One common fear that people have is outliving their savings. By saving money early on, you can ensure that you will have resources well into your nineties. 

Diversify your investment portfolio. Combine your employer-sponsored plan with IRAs and brokerage accounts. You can maintain some hard assets, but make sure you also have cash in savings accounts. 

There is no set rule for how much of your income you should save every year. Talk to your financial advisor about what seems reasonable. 

In general, you want to have your retirement income at 80 percent of your pre-retirement salary. If you make 80,000 dollars a year, you want to have 64,000 in retirement. If you plan on traveling or moving abroad, you should have even more money. 

Try putting aside 20 percent of your post-tax paycheck into retirement savings. Adjust as you make more money and investments. 

Indexed Annuity

An indexed annuity is an annuity that is tied to a stock index. It is distinct from a fixed annuity, which has a constant and unchanging interest rate. The interest rate of an indexed annuity goes up and down depending on stock performance. 

This means that an annuity provides more money when times are good. Even when times are bad, an indexed annuity allows for more savings than a variable annuity. 

Index annuities do have a guaranteed minimum return. Your contract will specify a certain amount of your principal that you will get back. To determine the interest, you can select several different types of indexed annuities.

An annual reset package looks at the change in the stock index from January to December. It ignores declines, providing interest based on overall increases. 

A high watermark annuity examines the stock values at various points in the year. It takes the highest value, then compares it to the one when the annuity contract started. The increase in values determines the interest rate. 

A point-to-point annuity is similar to a high watermark one. It examines the change at two preselected points in time, which could be over several years. Most contracts have a term, so a point-to-point annuity will use the start and end of the term. 

Index averaging looks at the value of the index every day or month, then average certain values together. 

Many people are worried about outliving their income. An indexed annuity provides a protected monthly income, which decreases the risk of outliving. 

Social Security

Another resource at your disposal for income planning is Social Security. You can qualify for Social Security at 62. This makes it a desirable source of income for people who want to leave work a little early. 

But you need to be strategic with Social Security. If you retire later, you can receive more benefits. 

You pay taxes into Social Security while you work. According to the Social Security Administration (SSA), beneficiaries receive 40 percent of their pre-retirement income. This is a good foundation to build upon, but it is not enough for many Americans to retire. 

Keep in mind your Social Security payments while you are planning for retirement. But don’t weaken your portfolio or employer-sponsored account. Save up the majority of your money through those programs, then use Social Security as a safety net. 

You can use your Social Security money for anything you’d like. If you’re comfortable, consider making investments with the funds. This will give you opportunities to earn money while you are retired. 

You can only qualify for Social Security once you’ve earned 40 credits. You can earn up to four per year. You earn one credit for 1,470 dollars in earnings. 

If you become disabled and unable to work, you can use your benefits. But the SSA only grants disability benefits under rare circumstances. You should incorporate contingencies into any financial plans you make. 

Get Smart When Income Planning for Retirement

Income planning for retirement is straightforward yet profound. Think of when you want to retire, then find a good employer-sponsored account. Put some money into that account and different investments. 

An indexed annuity can give you savings over a long period of time. Consider your different options to guarantee yourself a monthly income. 

Leverage your Social Security payments. Use them to make investments while you are retired. Weigh the options of retiring early or working later. 

Work with experts on securing a stable retirement. My Guaranteed Income is Miami’s leading retirement advising firm. Contact us today.