I read an interesting article in the Journal of Financial Planning talking about the mindset of taking retirement income. It examined people's thoughts on how much of their actual retirement cash flow they can spend versus how much of it they should save. (Follow me here: I'm talking about how much of the actual monthly income payment they can spend...not how much of the nest egg they can take as income.)
The research team asked all the questions, gathered all the data, and came to the following conclusion: when a retiree has a guaranteed stream of income (example: receiving pension or annuity payments) they spend a higher percentage of that income versus when a retiree has a non-guaranteed stream of income (example: taking distributions from a 401k plan or IRA). The idea was when there was no perceived risk of running out of money, families made different choices in their day-to-day lives and had less stress. I felt that....I see this every day.
Probably one of the most common topics I talk to people about is how much money is needed in a retirement nest egg to have "enough" to retire. I math it out for them, they make a budget and cross their fingers that nothing bad train wrecks that well though out budget. Those that have the pension tend to worry about not having access to capital should that financial disaster come. Those that do not have the pension tend to worry about if their money will last their lifetime. Both camps worry...just about different things. And one worry is a lot bigger than the other.
Sohere's my thoughts: why not have both?
It's an old planning concept from the pre-internet days of financial planning: have enough of a guaranteed cash flow that all of your basic monthly needs are covered and then have the rest of your assets in an accessible account where you can draw on them when the time comes, provide some additional cash flow or leave as an inheritance to your favorite humans & charities. It's a planning concept I have been using for thirty years and while it gives no guarantees of the intended result, it sure cuts down on the stress of making irrevocable financial decisions when the time comes to actually retire from full time employment.
And if you are keen to have assets left at the rest of your life to provide generational wealth for your family, bless a charity with a financial windfall or just have that big safety net of numbers so you can lower your anxiety....I gently ask you to look at life insurance when you are young, spend less than you earn, hit your investing goals and prioritize your future over your now. It can be a relatively straightforward approach when planned thoughtfully.
Kimberly Enders CFP® CPFA
CERTIFIED FINANCIAL PLANNER®
Enders Wealth Management
38700 Van Dyke Ave, Suite 125
Sterling Heights MI 48312
www.enderswm.com
#kimenderscfp
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