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Strategies for funding a retirement nest egg have completely changed direction in less than a decade. For the 4 million baby boomers who will retire in 2015, the rules of retirement funding bear no resemblance to those of their parents and grandparents, who left the planning for their golden years in the hands of employers and the government. Even today’s pre-retirees who have diligently saved for retirement via employer-sponsored 401(k)'s and IRAs must adopt new strategies to ensure that retirement savings and investments will provide a dependable income source throughout all their years of retirement.The key to a successful retirement is deciding on the best options for generating a reliable income stream that cannot be negatively impacted by the market. When there is no pension to count on, Social Security alone may not cover the basic necessities like housing and health care once a person leaves the workplace. While many people put a significant amount of time and money into building a portfolio that will make retirement possible, too few put enough thought into how they plan to draw income from their investments after retiring.
Planning ahead to determine the best options for creating a steady cash flow after leaving the workplace is key to investing in a comfortable, worry-free retirement. According to Investment Advisor Representative David Blackston, the first step toward making sure a retiree will not outlive their income stream is establishing the amount of money they will need to maintain a comfortable lifestyle, and then determine what portion of that amount can be provided by their portfolio.
For example, if a portfolio provides a healthy $1 million in retirement funding, unmonitored spending and can reduce that figure quickly. Before an individual starts spending their nest egg, they must take the time to calculate the exact amount of money they will need to pay necessary bills and expenses every month throughout their retirement years. To establish that figure, first subtract the amount of the Social Security payment to be received, as well as any pension payment (if one exists) and other income from additional sources; the remainder is the amount the portfolio must provide to cover living expenses.
“If a person’s retirement savings are significant, a portfolio growth rate that keeps pace with inflation may be all they need to maintain a comfortable lifestyle,” Blackston says. “However, if their financial needs are greater than their retirement income, the portfolio may need to provide significant growth in addition to a steady income stream.”
To create an income stream that that lasts throughout one’s golden years and is guaranteed to cover essential expenses, the retiree also needs to determine where they plan to live, what hobbies they plan to pursue, whether travel will be on the agenda and whether or not they will be supporting a spouse and other family members.
After creating a detailed and realistic budget that identifies essential expenses like housing, food, taxes, health care, transportation, the total amount should be lined up against the established guaranteed sources of income. If the amount needed to meet expenses falls short, a retirement advisor can help determine what steps to take to fill in the missing income. While there could be several sources of income from which to draw in retirement, only three sources are guaranteed for life: Social Security, pensions and annuities.
Income annuities, which are contracts entered into with an insurance company, can be valuable when it comes to establishing a stable, predictable income in retirement. Upon purchasing an annuity, a portion of the retirement nest egg is converted into a steady stream of income, for as long as the individual lives. The retiree knows in advance how much he or she will receive each month, and payments will never fluctuate regardless of market volatility, even if the retiree lives to be 110 years old. Some annuities also offer an opportunity to grow guaranteed income streams through the upside potential of dividends.
Using a portion of one’s total assets to purchase an income annuity can be a valuable part of an overall strategy to create a reliable retirement income stream. Working with a financial expert can help determine how to take advantage of some or all of the income sources available to create a dependable retirement income stream.
Contact Info:
Name: David Blackston, Certified Estate Planner, Investment Advisor Representative
Email: Send Email
Organization: Blackston Financial Advisory Group, LLC
Phone: 888-319-5656
Website: http://Blackstonfinancialgroup.com
Source URL: http://councilofeliteadvisors.com/liftmedia
Release ID: 85302
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