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First, we use retirement planning here because it conforms to a lot of guidance from established sources as to what financial planning entails. If you choose to work with us, you will find us using the term “financial independence” in place of retirement planning, especially since we hope that the security that often accompanies independence comes well before traditional retirement age.

Retirement planning requires a change of perspective. In retirement, there is no more income from work. Instead, retirees need to reverse their saving behavior and begin to draw on accumulated savings in order to support their lifestyles.

The most important risk that we address is the chance that a retiree runs through all sources of income. The presence of Social Security income in most retirees’ profiles mitigates this risk to some extent. However, as we have witnessed recently, Social Security has begun to change claiming rules. No one born after 1954 should assume that Social Security as we know it today will be available at retirement. Something will be there, but we have no idea what it will look like when we get there.

Integration of health care spending has risen in importance recently due to two conditions, increased longevity of retirees and the ever-increasing cost of healthcare. Advisors are now receiving guidance that a couple might spend as much as $240,000 in healthcare expenses in retirement, even after accounting for the assistance provided by Medicare. As an aside, the income brackets that determine Medicare Parts B & D premiums have changed, making Medicare more expensive for retirees in higher income brackets. Managing income in retirement is more important than ever when assessing the cost of Medicare programs.

In sum, we have seen simple rules of thumb, such as the 4% drawdown rule, put under pressure as retirement planning gets more complex, retirement years are extended, and retirement gets more expensive. Income planning takes the place of the savings strategy of pre-retirement years. The primary financial planning goal of an income strategy is assurance that retirees do not outlive their incomes. After structuring a plan mitigating that risk, client goals for travel, vacation homes, and legacy plans can be addressed.