Income Planning

So You Can Afford The Life You Want

Retirement planners, and even The Motley Fool, believe the most important aspect of retirement planning is income. This means more than simply making sure you have access to enough money during retirement; it means more than having a budget of retirement income and expenses and predicting what the future holds. Your income needs to be sustainable over your lifetime – meaning you need more retirement income than taxes and expenses.

There are a few things that need to be considered when planning for retirement income. One of the most important is how your retirement income will be taxed. Another thing to consider is how much retirement income you will need to support the lifestyle you want. Additionally, it's important to make sure you have a plan for retirement income distribution – meaning you need to think about how you will use your retirement income over the course of your retirement years.

3 Things To Consider

Saving, assets, and investments used in retirement planning

What You Have

You've saved, invested, and acquired. Was it enough?

Do you have enough assets to cover your retirement expenses?

What You Need

Your paychecks stopped, but the bills didn't.

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You might be retired, but Uncle Sam still wants his cut.

In retirement, you have a lot of options when it comes to how your money is managed and distributed. In fact, there are so many choices that it can be very confusing trying to figure out what is best for you.

Just one income strategy in retirement might require keeping assets in several different accounts - with some being held in retirement accounts such as a 401(k) or IRA and others being held outside retirement accounts in an investment account or bank account. If this sounds complicated, that's because it can be! Many people hire retirement planners who simply take on the responsibility of managing all of these details. A retirement planner can help make sure nothing falls through the cracks and everything is done properly (and legally).

Retirement planning strategy

Income Planning Is All About These 4 Things

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Social Security

Retirement planners will help you assess whether or not you should take your retirement benefits early, at "full retirement age," or later, after your full retirement age. A retirement planner will also show how delaying the receipt of your benefits can increase their payout amount. This is known as the "break-even" point. When making this decision on when to start taking Social Security, retirement planners use the break-even calculation to determine how long it would take for delaying one's retirement benefits to pay off in the form of a higher payout amount.

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an illustrated medicare card


Planning for future medical expenses is a major part of income planning. Many people are eligible for Medicare before they are eligible for Social Security - often between ages 65 and 67. Retirement planners will help clients understand what to expect from Medicare and how to enroll in the program. Additionally, retirement planners will help you understand whether or not it is better for you to remain with your current employer's plan or switch to the government-sponsored Medicare plans.


Retirement planners can help retirement account holders determine when they must start taking required minimum distributions (RMDs). Retirement planners use their clients' retirement account balances, retirement goals, and withdrawal strategies - along with other information - to determine when RMDs are due during retirement.

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tax forms and a calculator


One of retirement planner's biggest concerns when it comes to retirement income planning, are taxes. One of the most popular retirement assets is municipal bonds, which are favored because they don't pay taxes on the interest. However, for people in retirement that rely on their investments or retirement accounts to live on month-to-month, any bond investment with dividends will be taxed as income instead of capital gains.

This can mean paying taxes in retirement at a higher rate than you did when you were working and taking home a paycheck each month. Many retirees find themselves considering converting some or all of their retirement funds into Roth IRA so that when they finally do start drawing out distributions from their 401(k), IRAs, etc., there won't be any taxes. What strategy is best for you? That's where a professional retirement planner comes in.

Retirement planners will…

  • help assess whether or not you should take retirement benefits early, at "full retirement age," or later, after your full retirement age;
  • show how delaying retirement benefits can increase their payout amount;
  • help determine when RMDs are due during retirement so they don't accidentally trigger penalties;
  • help develop a tax strategy so that retirement withdrawals are taxed at a preferred, often lower tax rate.
  • A retirement planner will help you consider all of your retirement income sources and retirement spending needs to make sure they meet, and ideally exceed, your retirement goals.
  • Analyze annuities and other investments (into which you may roll funds from existing retirement accounts)
  • Cover pension payouts
  • Include your personal savings — including outside IRAs or 401(k)s — that can be used during retirement
  • Once retired, retirement planners will also review other aspects of retirement spending:
  • Consider Healthcare costs (long-term care insurance can help protect against potentially high medical bills)
  • Calculate mortgage payments/housing expenses (some retirement planners may recommend buying a smaller house or downsizing so housing costs are lower in retirement)
  • Help you plan transportation costs (are you taking public transit? If not, your car still needs gas, repairs, and insurance)
  • Calculate how much you can spend on food and entertainment
  • Other living expenses such as clothing, utility bills, etc.