Income Planning in Retirement
Thomas Mellum is a financial advisor at Cornerstone based in Reno, NV. Recognizing that no two financial situations are the same, Thomas is committed to creating thoughtful strategies that support clients in reaching both their short- and long-term financial goals. His approach centers on gaining a clear understanding of each client’s unique needs and building solutions that guide them toward lasting success.
YOUR RETIREMENT INCOME PLAN: CONSIDER THESE 5 THINGS
Retirement can be both an exciting and scary time in an individual’s life. What once was a consistent schedule with a consistent paycheck attached to it becomes free time and self-created paychecks from savings accounts that have accumulated hard-earned funds during working years. Many people ask, “Am I doing the right things to set myself up for success in retirement?” or, more simply, “Do I have enough money to retire?”
While these questions can bring about feelings of stress or unease, here are five key points to consider to help confidently navigate income planning in retirement.
Account for Inflation
Inflation can be a very real threat to a successful retirement plan. If someone retires at age 65 and has a family history of longevity (90+ years), that allows for inflation to grow for 25 years during retirement. To combat inflation, individuals must remain vigilant in their investments. For conservative investors, it is important to understand that while safe investment options such as CDs and money markets promote near-zero volatility and steady, slow growth, they can also underperform inflation. If this occurs, an investor may be “safely losing their money” when looking at it from the perspective of purchasing power. As an example, if inflation is reported to be 4% over the course of a year, and a conservative investor has most of their fund in a money market account paying 3.25% for the year, they effectively “lost” 0.75% to inflation, i.e. purchasing power.
The Impact of Taxes
Taxes are always a factor in a successful investment plan. Understanding tax deductions, IRMMA brackets (Medicare premium costs), marginal/effective tax rates, required minimum distributions (RMDs), and how different investment accounts are taxed once funds are withdrawn are all very important pieces to the retirement income puzzle. Roth conversions are another part of a retirement income plan, as they may be appropriate in certain circumstances to manage long-term tax exposure, and thus taxes/costs from items such as RMDs and Medicare premiums.
Know Your Investment Objectives
Investment objectives are another important factor. While this may seem self- explanatory, it is important to make sure that your investments are geared towards your financial goals. If an individual is taking income from their investments every month, utilizing an income-producing strategy with some of the portfolio is important. These strategies are designed to emphasize income generation through dividends and interest, rather than relying on stock/bond appreciation to help meet the withdrawal needs from the portfolio. This strategy would be considered a “short-term” bucket. An “intermediate-term” bucket strategy would be investing funds in a slightly more aggressive manner, with a mix of both stock appreciation and dividends and interest to generate a modest return. This bucket is then used to help “refill” the short-term bucket once it “overflows” from growth, or the short-term bucket is drying up. This bucket is for funds that would be utilized in 3- 10 years. Finally, a “long-term” bucket strategy would be more heavily allocated into stocks and would have a time horizon of ~10+ years. As this bucket fills up from growth, the overflow would fill the intermediate-term bucket, the intermediate-term bucket fills the short-term bucket, and the cycle continues.
Long-Term Care
Long-term care is a growing concern for many retirees. Long-term care costs are expensive, and yet, unfortunately, necessary. Coming up with a plan to help pay for potential long-term care costs is prudent to help minimize the effects that these high costs can have on an otherwise successful retirement income plan. Long-term care insurance, self-insurance, or certain life insurance are all viable options.
Financial Flexibility
Flexibility is another key piece to a successful retirement income plan. As the years go by, needs can change, whether it be needing more (or less) income for discretionary spending such as travel, increased cost for medical care, downsizing a home, etc. Having a financial plan that can be flexible to any changes life throws one’s way is of great importance for success. Market risk, economic and global changes, and inflation are all factors that can be accounted for with a flexible financial plan, as these factors are always present.
WHERE TO GO FROM HERE
Do you have questions surrounding your retirement income plan? Contact an advisor on our team to discuss how these concepts may apply to your individual retirement planning needs. Call our office today at (775)853-9033 or click here.
Based in Reno, NV, Cornerstone is for individuals and families looking to grow wealth, protect and preserve their life savings, and plan for the distribution of their estate in a tax-efficient manner through a tailored strategy. Schedule a time to discuss your financial goals with us.
©2025 Prime Capital Financial. The views and information contained herein are (1) for general educational or informational purposes only, (2) are not to be taken as a recommendation to buy or sell any investment, and (3) should not be construed or acted upon as investment or tax advice. The information contained herein was obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. This information does not constitute legal advice. Prime Capital Financial and its associates do not provide legal advice. Individuals should consult with an attorney regarding the applicability of this information for their situations.