George Foreman once said, “The question isn’t at what age I want to retire, it’s at what income,” while Dr. Jeffrey Brown, a retirement expert and past advisor to the White House, is quoted as saying, “Income is the outcome,” when asked about retirement planning.
Rick Nye often tells his clients, “For those who are retiring today, it is not cash, but the abundance of cash flow, that’s king!”
The foundation of a great retirement plan is a rock-solid retirement income plan, or RIP. Our goal is to build a RIP that will lead you to that place we call a financially stress-free retirement. RIP is also an acronym for “rest in peace.” We believe that resting in peace (in retirement) is largely accomplished with contractual income that is both sufficient and diverse. Our definition of contractual income is simply this: Income that continues for life, which is unaffected by market volatility and is provided to you by a dependable source. Sources of contractual income are pensions, Social Security and annuities.
The means justify the end where the “means” is plenty of contractual income and the “ends” is a successfully planned retirement. A successful income plan, by definition, effectively coordinates all of your sources of contractual income, which is usually coupled with a prudent withdrawal schedule on your retirement account resources such as 401(k), IRA, 403(b) and nonqualified or after-tax accounts. Measuring success of the income plan is determined first by meeting your retirement income objectives each year while also taking steps to preserve these retirement resources for your future need for income.
A successful income plan is a customized plan built with your individual specifications in mind. To that end, every attempt is made to maximize your sources of contractual income, such as pensions or Social Security benefits. If the planning process identifies a need for more contractual income, then another process begins. That process is to find the right annuity, in the right amount, for the right reasons, to fill that contractual income gap.
The income planning process must identify income risk. We define income risk as: The percentage of your annual income target that is not provided by contractual income sources such as pensions, Social Security and lifetime annuity payments. (For example: If your annual retirement income is $80,000 and your contractual income sources provide $40,000, then your income risk is 50%).
Outliving our money is one of the greatest fears we all face in retirement. The best way to address this fear is with a sound income plan built to last as long as you do. Nye Wealth Management can assist you in developing tax-efficient income and withdrawal strategies to minimize your taxable income while increasing your spendable income.