Retirement Income Blog

You may be able to achieve more of what you want for retirement than you think. The right retirement advisor, often can help you see implications of your actions, decisions, and wishes and how they impact your retirement and estate planning. But your advisor cannot help you unless he knows what wishes are ultimately on your mind.

Retirement planning–in the most general sense–seeks to optimize a retirement income consistent with what makes you happy and financially comfortable. You can start with a simple tool like the retirement income calculator but you need to explain to your retirement advisor in detail, what you desire for your retirement lifestyle–how many trips you want to take, do you need to stay at the Ritz or will a tent be okay, how often you need to done out, go to theatre, etc. And the choices you make impact both your retirement and estate planning because the more you spend in your retirement years, the smaller estate you leave.

Your required retirement income depends on the amount of assets you have, how you intend to use and draw upon them, where you will live, and if you intend to work during some of your retirement years.  How these questions are answered can have significant impact on optimizing what you have. What’s left will dictate a lot about your estate planning since as mentioned, retirement and estate planning are two sides of the same issue.  Of course, how you protect your estate are matters of specific trust and estate planning.

Your legacy may include a donation to charity and bequests to your children and others. How you make charitable donations and bequeath to others can be achieved in a variety of ways through various financial planning approaches. And how much can be devoted to these desires will depend on the amount in your estate.

There’s a general rule offered by most retirement advisors that you can spend 4% to 5% of your nest egg annually and it will remain intact.  Remember that if you spend 5%, your nest egg needs to earn a lot more to compensate for cost of living adjustments and also taxes.  To have $10,000 to spend, your nest egg needs to generate $12,875 if we assume $2,500 goes to taxes and another $375 needs to get reinvested into the nest egg to compensate for the following year when costs will be 3% higher.

For many people, retirement and estate planning are competing goals because what you spend, you cannot bequeath.  In fact, many advisors will show you that you can  “annuitize” your next egg–i.e. spend not only the income but also some of the principal each year so that you have more spendable income.  Of course. if you erode the principal, the heirs get nothing.

A good retirement advisor can help you minimize the tradeoffs of retirement and estate planning. For example, maybe you want to leave your home to charity but want to reside in it for life now. (You get a tax deduction if you make the arrangement now that you otherwise miss if you leave the home at death.) You can in fact have both of these–live in your home for life, leave it to your favorite charity and even get a tax break today. Experienced retirement advisors are aware of how factors supporting your goals are interrelated, often through complicated tax, social security rules, and financial strategies.

To see what you can actually achieve, you need to talk openly to your retirement advisor about your ideas and wishes.

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