As you make the transition from working to retirement, your financial focus changes from putting money into investments to drawing down, or withdrawing from, your retirement savings. At this time, your objective will become to create a retirement income that is:
Gone are the days when one source of income alone achieved all of the above. Those entering retirement today may have many sources of retirement income (such as investments, pensions and insurance). The challenge for today’s retirees is to:
To further explore this topic go to Prioritize Income Objectives and complete the online exercise.
It is important to plan ahead for sustainable withdrawals to ensure that your money lasts. If people could be certain of how long they would live, planning for retirement income would be a whole lot easier.
1. Identify all sources of retirement income and assets.
Have up to two years of expenses set aside in cash, less any expenses being covered by ongoing income payments (such as CPP/QPP benefits ).
2. Arrange streams of income to match expenses.
3. Always calculate income needs using after-tax dollars.
4. Ask yourself, “Where will the money come from, to cover income shortfalls?”.
5. Assess what adjustment you would make if your planned decumulation plan retirement date doesn’t work (for example, due to insufficient income).
6. Establish a plan B in case you are forced into retirement before you are ready.