Summary

A 57-year-old individual is planning for retirement income, exploring options to secure guaranteed lifetime income beyond social security, and considering the costs and benefits of different income strategies.

Abstract

The article discusses the financial considerations for a 57-year-old woman planning her retirement income strategy, with a focus on determining the necessary amount of guaranteed lifetime income in addition to social security benefits. It outlines the costs of securing additional monthly income through market investments versus insurance company products, emphasizing the advantages of the latter in providing guaranteed income at a lower cost. The author, who assists clients with such financial planning, suggests that creating an income floor can alleviate the risk of running out of money in retirement and allow for stress-free spending on discretionary activities. The piece also touches on tax-efficient strategies, such as Roth conversions, to enhance retirement income security and potentially eliminate taxes on social security benefits.

Opinions

The author believes it is crucial to start with the income needed to maintain the desired retirement lifestyle before allocating assets accordingly.
It is expressed that market-based income strategies are significantly more expensive and riskier compared to guaranteed income solutions offered by insurance companies.
The article posits that having guaranteed income in retirement not only provides financial security but also contributes to greater happiness due to reduced financial stress.
The author advocates for the use of deferred income annuities as a tool for tax planning, suggesting that they can facilitate tax-free retirement income and reduce tax liabilities on social security benefits.
There is an emphasis on the importance of working with a financial advisor to calculate precise income needs and to implement a strategy that ensures income sustainability throughout retirement.

57-year-old Wants More Retirement Income in 10 years (what does it actually cost?!)

(Don’t forget to checkout the video of this blog too)

So approximately 10 years prior to retirement is when you want to start asking yourself the important question….

How much of my nest egg do I want to designate as “income-producing” and how much do I want to have available for discretionary spending (i.e. the fun part of retirement… traveling ✈️, spoiling the grandkids 🍭, drinking 🍷 in an Italian villa on a Tuesday morning…you get the picture)!?

And to expand on this question just a bit further, the real question is how much income do you really need to cover all of your basic living expenses in retirement?

Once you have your basic living expenses covers, and you’ve guaranteed that you will never run out of income in retirement, the rest of your money should be “fun money”, right⁉️

I mean, I think so.

That’s why I think it makes sense to start with the income you need to live the lifestyle you want in retirement.

Once you have your income targets set, you simply work backwards.

This is exactly what I help clients with on a daily basis.

Figuring out how exactly much guaranteed income they need in retirement and exactly how much it actually costs (and providing income for yourself in retirement costs quite a bit less than you might think, especially if you plan ahead) 😏

Examples always help, so I want to use an example of a lady I’m working with.

So this lady is 57-years-old and and is going to retire in 10 years (at the young and vibrant age of 67).

Her plan is to take her social security retirement at age 67 since that is her full retirement age, and she will get 100% of her benefit at that point (which is very smart)!

She isn’t exactly sure how much additional income she needs on top of her social security, so we started with a few common targets (just to help her determine how much of retirement assets she would want to designate to income).

Here are the current market costs for providing an additional $2000, $5000, and $20,000 per month of income (that is guaranteed to last for the rest of life).

✅ $2000/month would cost her only $162,000 (and it would be guaranteed for life)

This number would cost almost $600,000 if provided by the market. It would also not be guaranteed ($600k x 4% = $24,000 per year or $2000 per month)

✅$5,000/month would cost her only $405,000 (and of course, it would also be guaranteed for life)

This number would cost almost $1,500,000 if provided by the market. It would also not be guaranteed ($1.5M x 4% = $60,000 per year or $5000 per month)

✅$20,000/month costs $1,620,000 (and you guessed it… also guaranteed for life)

This number would cost almost $6,000,000 if provided by the market. It would also not be guaranteed ($6M x 4% = $240,000 per year or $20,000 per month)

As you can see, it’s very expensive to provide income with the market, but it’s much cheaper to utilize the volatility absorption ability of an insurance company.

They can simply guarantee you much more income than you can provide on your own (without taking a ton of unnecessary risk).

So once you figure out how much INCOME you’re going to need in retirement you work backwards…

That’s where I can help.

We can work together to figure out how much of your retirement nest egg should be allocated to income, to create an income floor for yourself.

The rest of your money will be discretionary money for all of the fun and exciting things you have worked so hard for!

This approach not only gives you the peace-of-mind that you’ll never run out of money in retirement, but it gives the FREEDOM to spend your retirement money how YOU WANT.

Many studies have proven that retirees who have guaranteed income that they can never outlive are happier in retirement.

It’s because they have no financial stress!

Another added benefit to this income approach is that if done correctly, you can set yourself to perform internal Roth Conversions within a deferred income vehicle (which just means moving money from a taxable environment into a tax-free environment).

This one of the best ways to retire tax-free AND ensure that you won’t pay taxes on your social security either.

Let’s chat 💬😎

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To your success,

Matt