Converting Wealth to Income: The Importance of Creating a Comprehensive Retirement Plan


Saving for retirement is a priority for many, but no matter how much you’re saving, chances are you haven’t thought about the broad range of factors that could affect your ability to make those savings last through your retirement years.

As the first of the baby boomers officially become eligible for retirement, there is potential for strain on the health care and Social Security systems, as well as the investment landscape. Therefore, it is increasingly important for individuals to not only have a plan in place to continue accumulating wealth, but also one for generating a steady income stream that they can live from during retirement.

While retirement may seem far off for many, it’s important to keep in mind that more and more people are retiring early. And with increasing life expectancies, individuals will need to make their money last even longer.

Underestimating your longevity is just one way to exhaust savings during retirement. However, to develop a realistic retirement income plan, you will need to think about other factors as well. First, what will your sources of income be during retirement? In other words, where will your “paycheck” come from? Chances are there will be more than one source of income, such as pensions, Social Security, investments and earned income if you decide to continue working.

Making Lifestyle Choices

Once you’ve determined where your money will be coming from, you also need to look at how you want to live during retirement. Lifestyle choices will greatly affect your retirement income needs. Maybe you want to travel or pursue a hobby. Maybe it’s been your dream to help finance your grandchild’s education. You might even be surprised to find out that your income needs can actually increase during retirement rather than decrease.

Your retirement income needs will probably require you to withdraw a certain percentage of your savings and investments each year. If you withdraw a high percentage, you might deplete your retirement assets sooner than expected. Additionally, you will want to work with your tax advisor to make sure you’re applying the most tax‑efficient sequence of withdrawals from your 401(k), IRA and other investment accounts.

Inflation should also be considered as you look ahead to your retirement income needs. Even a relatively mild annual inflation rate can erode purchasing power. For example, at an inflation rate of 3%, the $100,000 you have today will be worth only $55,368 in 20 years — a loss of 45% in value.

Taking these factors into consideration will greatly increase your success in developing a realistic retirement plan. Whether retirement is in your immediate future or is still five, 10 or 15 years away, it’s never too late — or too soon — to lay the foundation for an income plan that will see you through retirement. Talk with your financial consultant about building a plan that will help you convert your wealth into the retirement income you’ll need to live comfortably in your golden years.

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Lee Eisinberg is a Managing Partner with ABLE Financial Group in Scottsdale, Arizona. For more information, please call Eisinberg at (480) 258-6098. Investment products and services are offered through Wachovia Securities Financial Network, LLC (WSFN), member FINRA and SIPC, a registered broker-dealer and separate non-bank affiliate of Wachovia Corporation ABLE Financial Group is a separate entity from WSFN. © 2008 Wachovia Securities Financial Network, LLC.

Money Talks is a regular department in Agency Sales magazine. This column features articles from a variety of financial professionals and is intended to showcase their individual opinions only. The contents of this column should not be construed as investment advice; the opinions expressed herein are not the opinions of MANA, its management, or its directors.