Will You Survive Retirement

Remember the blockbuster disaster film Deep Impact from the summer of 1998? A large comet is discovered far out in space on an eventual collision course with Earth. Humanity tries to stop this catastrophe from happening, and faces the possibility of the comet slamming into Earth, punching our ticket to extinction.

The film turned out to be just okay, but one of the bright spots is the performance of Morgan Freeman as President Tom Beck. Later in the film, when all efforts to destroy or deflect the comet have failed, President Beck addresses the nation to say, “If the world does go on, it will not go on for everyone.”

Retirement is like that comet, streaking your way. You may not know the exact date it will hit, but you know it’s coming, so you can prepare for it. It should be one of the greatest times of your life. Sadly, it won’t go on for everyone.

One of the top fears of retirees is outliving their money, and there’s good reason. With life expectancies constantly climbing, you stand a pretty good chance of living 30 years or more in retirement. That’s 30 years without a job and a steady paycheck. That, friends, is being unemployed, and it could last as long, or longer, than your actual career. If your money doesn’t last, you face going back to work or limiting your lifestyle.

Lots of people know how to accumulate wealth. Where they struggle is knowing when it’s time to move from accumulation to preservation and distribution. If you are 10 years or less from retirement, you probably know what this feels like. You fear another 2008-like market dip and want to protect some of your money, but aren’t sure how much. You wonder how you’ll manage your investments for maximum income and minimum risk, but aren’t sure how. You want to leave a legacy for your family, but…you get the picture.

Having these questions and concerns is normal. The way to address them is with an income plan. Is it smart to choose an investment strategy before knowing how much retirement income those investments need to generate? Is it smart to take medication before knowing exactly what’s ailing you?

If you need $5,000 per month after taxes, but the investments you choose maximize growth and not yield, that’s not good. If you need some of your money in 2 years, but are managing it at the same risk level as money you’ll need in 20 years, that’s not good. If you want to minimize taxes, but choose taxable dividend paying stocks without considering tax-free municipal bonds, that’s not good. Choosing an investment strategy before creating a customized income plan is backward. An income plan should dictate the investments you choose, just like a medical diagnosis should dictate the medication you take.

A solid income plan includes cash, guaranteed sources of income, and income producing investments. It will factor in expected rates for inflation and taxes. Most importantly, it will help you decide:

  • when to claim Social Security benefits.

  • how much money to protect from the volatility of the market.

  • how to segment your investments so money you need sooner is at less risk than money you need later.

Planning the retirement of your dreams doesn’t happen overnight, but you know it’s coming. Want to know what your future holds? Start preparing for it now. Contact your financial advisor to create your customized income plan.

Damon King is a CERTIFIED FINANCIAL PLANNER™ professional, an independent Investment Adviser, and wealth management specialist with ChappelWood Financial Services in Edmond, OK. Damon can be heard each weekend on “It’s All About the $Money, Honey!” airing on NewsRadio 1000 KTOK in Oklahoma City, and is the lead instructor for the Rock Your Retirement financial enrichment series. He can be reached at Damon@ChappelWood.com or 405-348-0909.

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