Income Sources and Income Needs During Retirement

Cash, dough, greenbacks, moollah, dinero—whatever the moniker, the amount of money we have will define what we can and can’t do in retirement. Retirement is all about money and our ability to manage it so that we can use it during our retirement years and leave an estate for our loved ones if we choose to do so. Perhaps the most important point is to convince you that you must establish an income that you can- not outlive. With life expectancy increasing, you run the very real risk of outliving your income.

In many respects, the art of asset accumulation is far less challenging than the art of asset distribution. The reason is that during our earning years, we have more time available to manage emergencies or a shift in our goals. Time is the commodity that will drive many of our decisions in pre- and postretirement planning, and we have less and less time available to us as we grow older. The other reason postretirement asset distribution is more challenging is that in retirement, we still have all of the issues of continuing to manage our assets in addition to the burden of managing the distribution of those assets to create or supplement other retirement income sources. When you retire from your main source of income, your job or business goes away.

Let’s continue to look at this challenge from our mountain climbing perspective. At the start of the climb, you sense you have more time. You can typically enjoy the beauty of the surroundings and the majesty of the task before you. You may also have many choices for getting to higher steps on the mountain. But the higher you go, the more limited your choice of routes becomes; the terrain is more dangerous and the air becomes thinner and thinner. A mistake higher up on the mountain magnifies the risk. Similarly, a mistake in your postretirement strategy magnifies your risk of not being able to provide sufficient income to meet your goal. This is a critical chapter for you as we try to quantify the income needs, the income sources for retirement, and the risks that impact income during retirement.