Everything You Need to Know About Retirement Income Planning
Courtesy ALAN EBRIGHT
Those of you inching closer to retirement are probably wondering how your golden years will work from a financial standpoint . This is a natural curiosity , as you will one day need to replicate your income from your savings and other sources . While this might sound like a daunting task , it ’ s actually pretty simple to illustrate . I think that the advisory and planning industry provides too much detail around the topic and it might be explained in a way
that is confusing or downright scary . I ’ ll attempt to alleviate those feelings as we walk through a simple example .
Most of you probably have a good handle on your income sources and expenses . The goal now is to figure out your known sources of income . Typical sources :
• Social Security
• Employer Pension
• Rental Property
These are all hypothetical numbers for illustrative purposes
Social Security ( spouses combined ): Pension : Rental Property ( net of expenses ): Sub-Total :
$ 4,000 mo ................................$ 48,000 yr $ 5,000 mo ................................$ 60,000 yr $ 1,500 mo ................................$ 18,000 yr $ 10,500 mo ............................$ 126,000 yr
Now , let ’ s add-in the effects of $ 1,000,000 in investible money from all accounts . Let ’ s assume the income producing stocks and bonds in the portfolio throws off 2.5 % per year .
Then we need to figure out variable income from all your investment accounts ; IRAs , Individual Accounts , Joint Accounts , 401ks , etc . These accounts will be invested and will be throwing off income from the investments you own , plus appreciation ( over time ). This income can be added to all of your known sources , and voila , you have your retirement income plan . To give you more peace of mind , let ’ s plug in some numbers :
$ 1,000,000 @ 2.5 %.............................................................$ 25,000 Total …………………………………..………………$ 151,000 *
Continued on next page
DENTON COUNTY • 29