As you research retirement income planning options you will encounter several common strategies. It’s important that you understand the pros and cons of each one before you choose. Here is an overview of what you are likely to see.
- Put it in the Bank: Putting all your money in a bank will give you safety – and you will safely go broke. This is because your money will barely grow, and you won’t be able to maintain your standard of living in retirement. You cannot live off the interest alone, and if you take principal–you will quickly deplete your retirement accounts.
- Buy a Guaranteed-Income Annuity: True to their name, guaranteed income annuities guarantee your income in retirement. But that guarantee comes with a cost–control. If you use all of your life savings to buy an annuity, you will lose much of the control over your money. The annuity may also not protect your spouse at the same level it protects you. And annuities often do not often provide the income increases which will allow you to maintain your standard of living in retirement.
- Invest it All: This can grow your money and allow you to take a sustainable withdrawal from your account (usually 4-6%) for your lifetime. But if you have poor investment returns during the first decade of your retirement, you are likely to run out of money with which to live. This method relies on a luck and a good stock market to get through the beginning of your retirement. If you rely on this method, you are keeping your money–and your retirement–at risk.
A Better Approach… A Time-Segmented Strategy
A better approach to creating a retirement income plan is using a time-segmented strategy. A time-segmented strategy gives you a plan on how to invest money differently depending on the time when you will use that money. For example, money you will need in the first decade of your retirement is placed in conservative investments. This gets you through the first part of your retirement journey with less risk. Money you will use later in your retirement, say 15-20 years in the future, is invested more aggressively to give you an opportunity to grow that money.
With this approach, your emotions are more easily managed, because you know you have set aside the money for your near future while simultaneously planning to grow your wealth for your later years. This approach is logical, customized, provides cost–of–living income increases and can be designed to give you the opportunity to return your principal.
This approach is the cornerstone of our PROTECTED FUTURES™ process. Contact us today for a complimentary introduction to our process to learn more about how you can create your own time-segmented retirement strategy.