Multiple Layers of Retirement Income Planning

Retirement planning is more than just how your time will be spent; it also includes how your retirement will be financed.  It takes careful planning to maximize the income you have worked so hard to save and to help ensure it will last a lifetime.  There are many layers to consider in your retirement income planning.

Layer One:  Social Security.  Long a staple of retirement planning, Social Security continues to be a great source of fixed income for retirees.  However, due to the relatively small size of Social Security and its lack of ability to keep up with inflation costs, it should only be viewed as a piece of the retirement puzzle. 

Layer Two:  Pension Income.  Pension income is becoming a less common income source for retirees as more companies move toward defined contribution plans such as the 401(k) or the 403(b) into which the employees contribute.  For the individuals who will retire with pension plans, this builds a great base for retirement planning when coupled with Social Security.

Layer Three:  Part-Time Income.  A common trend of today’s retiree is the move from a full-time career to part-time employment.  This is done to provide additional income as well as to provide an opportunity for individuals to work in areas of personal significance.  Retirees want to remain active.

Layer Four:  Investment Income.  A key to successful retirement planning is the management of investment and retirement accounts.  With the average retiree facing nearly 30 years of income needs, inflation risk is now as big a threat as market risk.  The two key components to maximizing this area are a diversified portfolio and an appropriate spending amount.  A diversified portfolio will contain different types of investments within each of the major asset classes—stocks, bonds, and cash.  A common annual spending amount that gives the best opportunity for making your money last is between four and five percent. 

Layer Five:  Charitable Income.  There are several tools that can convert non-cash assets into lifetime retirement income while providing tax deductions.  The two most common tools are the Charitable Remainder Trust (CRT) and the Charitable Gift Annuity (GA).  The CRT and GA allow an individual to take a highly appreciated asset—commonly real estate or stock—deposit it inside a charitable vehicle, and sell it while avoiding capital gains on the asset as well as commonly providing a charitable tax deduction.  Either of these tools can then be used to provide a consistent lifetime income to the retiree and their spouse and, in some cases, continue on to heirs for a limited number of years.
For retirement planning assistance, contact Bob Lamb, CFP®, SVP, Steward Capital Advisors toll-free at 866-447-4749 or email  blamb@stewardcapitaladvisors.com.  Steward Capital Advisors was formed by AG Financial to provide faith-based wealth management and investment services to individuals, ministries, and institutions.