Retirement Income Analysis

June 06, 2014

A mentor of mine once asked me, “If you were doing something wrong, when would you want to know?” My response was an immediate, “I would want to know now!” I have asked this question to countless others and their response has always been the same.

In our financial lives we should have the same attitude! If we find ourselves on the wrong financial road, we should seek an immediate course correction. As we address our retirement readiness, a simple place to start is to answer the 12 Key Questions Every Retiree Must Answer. This free report can be found at It’s one thing to have answers, however, it’s quite another to have the right answers. A proper Retirement Income Analysis can provide the correct answers to these 12 key questions and much more.

A Retirement Income Analysis comprises six simple steps. If one is going to be retired for 20 to 30 years or longer, doesn’t it make sense to spend a few minutes now to help insure your retirement is everything you envision it to be? Even if one is already retired, conducting this exercise can yield important post retirement course corrections.

Step One: Retirement: What Does It Look Like? In step one it is important to articulate the retirement you’ve always envisioned. What does it look like? What are you doing? Where are you doing it? Who are you doing it with? Retirement planning isn’t just about the money. It’s also about the things money can’t buy.

In order to find out how much money you will need to set aside to retire comfortably, you’ll need to have a feel for your hopes, dreams and goals. Does your vision of retirement include starting a business, working part-time, moving or relocating, volunteer work, a new hobby, travel, remodeling your home, going back to school, playing golf, tennis or fishing, visiting a vacation home and/or spending time with kids and grandkids?

Step Two: Take an Inventory of All Assets, Savings and Investments. In step two we take an inventory of all of the assets, savings and investments. No matter your situation, one of the first steps is to assemble the key pieces of information needed in creating a sustainable income stream in retirement.

Included in that inventory are such things as a 401k, 403b, 456 plans, IRA’s, insurance and annuities, stocks, bonds, mutual funds, real estate, REIT’s, investment property, checking and savings accounts, business interests and/or profit sharing plans. If assets are positioned properly, typically 10-15 years prior to retirement, a significant increase in guaranteed retirement income can occur. Typically, this can equate to a 30%, 40% or 50%+ increase in lifetime income.

Step Three: Calculate Your Expenses in Retirement. In step three, we calculate what the expenses will be in retirement. Some expenses may increase while other may decrease. This step entails a host of lifestyle questions to determine what expenses will look like in retirement. When you plan to retire, where you plan to live, and how you plan to spend your time will all have an impact on how much you will need to save to fund the retirement you envision. We will focus on housing, food, transportation, clothing, healthcare, entertainment, travel, and various miscellaneous expenses. With a handle on your retirement expenses, its time for step four.

Step Four: Total Up Income From All Sources. Most working Americans have only one source of steady income: their job. In retirement, one is likely to have a patchwork quilt of income streams. In this step we will look at all available sources of retirement income including any retirement accounts, pensions, stocks, bonds or mutual funds, royalty or rental income, savings accounts, inheritance, insurance and of course, Social Security.

Step Five: Retirement Surplus or Shortfall? Step five determines if one will have a retirement surplus or shortfall. One of the biggest risks to a comfortable retirement is running out of money too soon. It is essential to know this fact well in advance and to quantify the amount of the shortfall or surplus. If the Retirement Income Analysis projects a shortfall, one might have to make compromises to reach one’s goals and/or take strategic measures to remedy the problem.

Step Six: Explore Various Options and Trade-Offs. If a retirement shortfall exists, then various financial strategic options, along with their associated trade-offs, must be developed, discussed, considered and implemented. If one is projected to have a retirement shortfall, now is the time to address the problem while there is still time to make adjustments. If one is currently in retirement, various financial strategies can still be implemented to advert running out of money.

Often, if there is enough notice, a simple repositioning of assets can occur to mitigate potential risks and put a plan in place to maximize retirement income. For someone who is saving aggressively for retirement, a simple redeployment of assets in a more efficient way can significantly increase retirement income and on a guaranteed basis. Improve your retirement readiness by obtaining a Retirement Income Analysis.