Why Income Distribution Planning Is Key for Your Retirement

Why Income Distribution Planning Is Key for Your Retirement

April 21, 2022

A good retirement plan requires more than just a savings goal; it requires a plan for how that money you saved will be distributed during your retirement years. Throughout your working years, you had a general idea of how much income you would have each month, allowing you to properly plan for expenses in that month. Without a proper income distribution plan, retirees won’t have this kind of financial knowledge. Here’s why income distribution planning must be a part of any successful retirement plan.

Ensure Steady Monthly Income

When you retire, your income is no longer based on an undefined earning potential. It is now based on what you’ve saved, whether or not those assets will grow over the years, and how you draw upon those assets to support yourself. Relying too heavily on one income source in retirement may leave you with gaps in your income. Failing to understand when you can draw on certain accounts can cause you to fall short of your monthly expenses. Proper planning ensures that you can meet your obligations every month and continue to support your current lifestyle in retirement.

Plan for Income Taxes

While most people’s income tax bracket drops during their retirement years, very few individuals actually pay zero tax on their retirement income. Even a portion of Social Security is taxable for most people; depending on your annual income, as much as 85% of your Social Security income can be subject to tax. It’s important to know how each of your income sources during retirement will be taxed, so you can make tax-smart decisions regarding which accounts to draw upon and when. Doing so can save you thousands of dollar in taxes.

We can work alongside your CPA or tax advisor to create a more comprehensive, tax-efficient strategy for distributing your retirement income.

Continue Growing Assets

Your retirement years don’t have to be a constant drawdown of your assets’ value. With the right planning and effective wealth management, we can help you continue to grow your wealth while preserving your nest egg. Any investments you make during your retirement years should probably be relatively conservative, but can still provide long-term growth that helps ensure your wealth lasts throughout your lifetime. We can help manage your portfolio in a manner that works for your risk tolerance and lifestyle to keep your retirement on track.

Have Liquid Assets for Emergencies

Even when living on a fixed income, it’s extremely important to have access to a source of emergency funds. Effective retirement income distribution planning can ensure that you maintain a rainy day fund for unexpected medical bills, home repairs, and other emergency expenses. Without a plan in place, costs like these can often derail a person’s retirement and drastically alter the rest of their retirement years.

If you want to preserve and plan for your retirement years, you need to do more than set a savings goal; you need to put a plan in place for how to use those savings. Contact Conversion Financial Services today to get started on a comprehensive retirement plan that will address these issues and more, so you can feel confident in your financial future.

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