How to Protect Your Retirement Income

Managing cash flow in retirement is a critical piece of the planning for your funds to last your lifetime. Yet, events outside of your control, such as a change in health status, sudden market downturn, increase in inflation, or a recession can quickly upend your plans and leave you vulnerable. While you can’t prevent the unexpected, the steps listed below can help you protect your retirement income from unforeseen events.

1. Shore up your safety net. Maintaining three to six months of essential expenses in liquid assets like bank savings or money market accounts is especially beneficial during periods of increased market volatility or economic instability. Adequate emergency savings can help you avoid driving up credit card or other debt when faced with an unanticipated expense. Having emergency savings to draw down on during periods of extreme market volatility may also allow you to pause your investment account distributions and avoid cementing losses in your long-term investment accounts, allowing those assets time to recover.
   
   
2. Evaluate your lifetime income options. For most people, income in retirement is derived from a combination of Social Security benefits, retirement accounts such as a 401(k) or 403(b), and/or individual retirement accounts (IRAs), a pension, and personal savings or investments. Social Security and pensions are considered stable income sources because they pay a monthly benefit for life. Ideally, you want enough guaranteed income to cover your essential expenses, including housing, food, clothing, healthcare, and transportation. That can be difficult to manage with Social Security alone. However, even if you don’t have a pension, there may be ways to structure a portion of your assets to help create inflation-adjusted income for life through a strategy that allocates assets based on different time segments to address risk and enable long-term assets to grow untouched to generate future income. Your financial advisor can help structure your investment assets to allow for both. 
   
   
3. Leverage technology. While no one can predict the future, your financial professional has access to sophisticated financial software that can model different scenarios and provide highly customized retirement cash flow projections. This can help take the guesswork out of your spending and withdrawal strategies as you’re able to see exactly how your assets are working to generate the income you need throughout your life in retirement. If you haven't completed a comprehensive financial plan, it's not too late. Start by creating/updating your budget so you have a clear idea of your spending and cash flow. Then schedule an appointment with your financial advisor to work through a financial plan. 
   
   
4. Stick to a spending plan. No strategy can compensate for chronic overspending in retirement. If you regularly spend more than you’ve budgeted for monthly expenses, you’ll need to make up the difference by withdrawing more money than planned from long-term investments, which leads to depleting assets needed to fuel growth and generate future income. A monthly budget or spending plan will help you manage spending and keep your short and long-term retirement goals on track.

If you’d like to learn more about financial planning, cash flow or distribution management, or tax-smart strategies that seek to create predictable, inflation-adjusted income tailored to your needs, call the office to schedule a time to meet or visit our calendar to schedule a time that works for you: www.calendly.com/kfn.