How can I find out what to expect from Social Security?

One way to estimate SS benefits is by creating an account at the SSA.gov web site. Near the top left of the home page can download your Social Security Statement. Another way is to use the Retirement Calculator on the same web site. 

 

How do I determine my income gap?

 

Essential Expenses - Social Security - Pension = Income Gap

 

What expenses should guaranteed income cover?

Most retirement planners recommend covering essential “must-pay” expenses, such as:  Housing, Healthcare, Food, Transportation. The idea is to create an income floor so these costs are paid regardless of market conditions. Anything above that (travel, hobbies, gifting) can come from investment withdrawals.

 

Why not just withdraw money from my portfolio instead?

Withdrawals depend on market performance and sequence of returns. If the market declines early in retirement, withdrawals can permanently reduce the portfolio. 

 

How much of my expenses should be covered by guaranteed income?

There is no hard and fast rule because everyone’s situation is unique. It depends on things like age, amount of savings, your risk profile and risk capacity. Common planning approaches include: 

Conservative approach - cover 100% of core expenses

Balanced approach - cover 70-90% of core expenses

Flexible approach - cover essential non-discretionary expenses only

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What happens if I live a very long time?

Lifetime income payments continue for as long as you live, even if the original principal and gains have been paid out.

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What happens if I die early?

There are several options that can protect your beneficiaries:  Period certain guarantees (10-30 years), Joint Life payouts for spouse, refund provisions.

 

What about inflation?

Possible solutions include:  inflation-adjusted payments, laddering income start dates, using investments to provide increasing income later.

 

Are these payments affected by the stock market?

Once income payments begin, they do not fluctuate with the stock market.

 

Should I choose immediate income or deferred?

Immediate income is typically for those already retired or just retiring. Deferred income is for those not yet retired or for those wanting to create a future income source.

 

Do I still have access to my money?

Yes, with conditions. Many annuities allow a 10% withdrawal per year. Should an emergency arise and you need to take money from your income product before starting income you will decrease the income received later and potentially have to pay a penalty. Remember income products are designed to create lifetime income. Taking money out of the product defeats the purpose of using this planning tool.

 

Can I still keep my money invested?

Yes. Most retirement income plans include Social Security, lifetime income streams, and investment portfolios. The goal is to separate safety money from growth money.

 

Will I have to change my current financial advisor?

No. I’m an income specialist. I do not manage portfolios. You can keep your financial advisor. Better yet, introduce me to them. I would welcome an opportunity to help others create their own pension.