Don’t Retire Without an Income Plan

December 28, 2018

After putting years of work into your real estate career, easing into retirement can be an exciting time. But the luster can wear off quickly if you don’t have a good retirement income plan in place, especially if it becomes clear that retirement savings and Social Security income aren’t enough to cover expenses, says Jay Sharifi, an investment adviser and author of Building a Better Legacy: Retirement Planning for Your Lifetime and Beyond.

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“Some people retire with no income plan at all, but that’s like flying without GPS and still expecting to hit your target,” he says. Saving money for retirement and planning your retirement are two different things, according to Sharifi. “When you fly, you want to know exactly where you’re going and how you will get there. The same is true when you’re planning your retirement.”

Sharifi says start by asking yourself these three questions:

How much money do you need? “The general rule of thumb is that retirees will require 70 to 80 percent of their preretirement income to maintain their lifestyle,” Sharifi says. So, if you had an annual income of $100,000 before retirement, you need to shoot for about $80,000 in retirement. Once you decide what that number is, the key becomes matching your income need with the correct investment strategies, options, and tools to satisfy that need, he says.

How long does your money need to last? In 1950, the average life expectancy for men was 65, while for women it was 71. Today, men are averaging about 19 additional years, and for women it’s an extra 15 years, according to the Social Security Administration. Outliving the amount of money you’ve budgeted for retirement is a legitimate concern because people are living longer than they used to, Sharifi says. People will need to stretch their money out to meet their life expectancy. “You need to plan for at least 20 more years of income,” if you retire at 65, he says.

What happens when life plans change? Part of income planning involves taking into account what happens when one spouse gets sick or dies, potentially resulting in the loss of a pension check and definitely in the loss of a Social Security check. “Poverty after the loss of a spouse is more common among women than men, which isn’t surprising since women live longer,” Sharifi says. “The income goes down, but the bills coming in remain the same.” Retirees have a few options to alleviate this concern, such as life insurance plans, living benefit options, and joint-income riders that can be purchased when designing an income portfolio. A financial professional also can provide advice on how to maximize Social Security benefits.

“Leaving your retirement up to chance is inadvisable by nearly any standard, yet millions of people find themselves hoping for a happy ending instead of planning for one,” Sharifi says. “With information, tools and professional guidance, creating a successful retirement plan can put you in control of your financial management. And as a result, you won’t be flying blindly.”

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