Many people spend decades planning for the day when they can stop working. Those who are conscientious generally try to save and invest enough in a tax-efficient way in order to create sufficient capital to produce the necessary income to last throughout their lives. However, once you reach retirement the planning doesn’t end.
In fact, it’s critical for retirees to make smart choices about how much risk to accept, how to invest, how to efficiently generate income and how to minimize taxes. Everyone gets only one retirement. Planning mistakes will likely have adverse consequences on the ability to maintain one’s lifestyle.
Since having enough income is so critical to most retirees, I recommend that everyone who is in or near retirement, have a written income plan. A proper income plan should include all sources of recurring income, such as social security or pensions. Additionally, an income plan should include a list of all assets, an assumed rate of return, an assumed inflation rate, and sensible strategies for taking income from each account to promote maximum growth while minimizing the impact of taxes.
Anyone who is concerned about running out of money or worried about leaving their heirs a large inheritance will most likely find an income plan extremely valuable. Many times, after delivering customized income plans to our clients, they realize that they can increase their lifestyle without fear of running out of money. Other times, clients realize that they need to make changes if they don’t want to run out of money.
An income plan allows families to measure their progress each year in meeting their financial goals. We are often able to use the income plan as a tool for minimizing income taxes now and in the future. Having this information mapped out on one page can provide substantial peace of mind to a retiree.
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