Think Beyond Social Security When Considering Sources of Income in Retirement
While many working people have a single source of income, retirees often have multiple sources of income. That said, retirement planning is different for everyone. There are some general principles we use across the board, but everyone’s situation is unique, which is why we meet our clients at their point of need.
For many people, retirement goes through different phases. We are in a season now, in terms of life expectancy and how we live in formal retirement, that is very different than it was 40, 50, or 60 years ago. Back then, retirement was a much shorter time period, and there were more manual labor jobs than there are today. Today, people who work in a service-based or information-based industry don’t have as much physical impact on their professional careers.
In many ways, this has allowed for a longer life expectancy in retirement. That has a lot of impact on retirement planning. So, we need to look at strategies and ways in which assets and income sources are going to be there for the duration.
Here’s a look at a few sources of retirement income:
Social Security – Almost all Americans will receive monthly payments from Social Security. It’s important to understand your specific financial space to help determine when you should take Social Security. You can sign up for Social Security between the ages of 62 – 70, but the longer you wait, the higher your monthly payment will be. These payments are also adjusted for inflation each year.
Pension – There are still some jobs that provide a pension for retired workers. Traditional pensions provide a steady stream of income that lasts the rest of your life.
Investment portfolio – Healthy individuals can spend several decades in retirement. Having some savings in an investment portfolio to help with continued growth may be an option for some people. You should always consider your risk tolerance when keeping a portion of your retirement savings in equities.
401(k)s & IRAs - Traditional 401(k)s and IRAs allow you to defer taxes on your retirement savings and investment earnings until withdrawing money in retirement. Employer contributions may also be part of a 401(k) plan. The required minimum distribution will be needed after a certain age, so talk to your financial or tax advisor about what those tax codes look like as you get closer to retirement.
A Roth 401(k) or IRA allows you to prepay income tax on some of your retirement savings. That means that after age 59 ½, withdraws from an account that’s at least five years old are tax-free. There are also no distribution requirements for Roth IRAs.
Real estate – Owning real estate can be a good option for some people. Rental properties can provide a consistent source of income.
Part-Time Work – Many people continue to work into retirement because they need the money or they like to work. Part-time employment can make up for the lack of retirement savings and allow for some luxuries. A part-time job might even offer some health insurance benefits.
It’s important that you are aware of your retirement sources and how they go together in the most tax-efficient way possible. Remember, everyone is in a different space, so find what works best for you and your financial space.
If you have questions about your retirement plan or would like to talk with us further about our services, give us a call at (704) 987-1425 or visit us at www.northmainfinancial.com. If you wish to schedule an introductory meeting, we would be happy to meet with you at no cost or obligation to you.
You may also be interested in the following articles:
These Blogs are provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of SagePoint Financial.