retirement income

Structuring Your Retirement Income To Confidently Pay For Your EPIC Retirement Lifestyle

Think of your age as a level. Let’s say you’re 60 years young. You’re on level 60 and potentially you may need financial resources to get you to level 100 and for some beyond 100.

How are you going to arrange your financial resources to provide a reliable income to pay for your EPIC Lifestyle?

The biggest challenge pre-retirees face is how do they arrange their financial resources to keep the lifestyle they desire.

Where’s their income going to come from and how do they know it’s going to last?

Whether they choose to continue working or retire fully from the workforce.

Funding Your Retirement Income Options

In our previous posts we covered the 4% rule. Turning your retirement income into a maths equation.

Simply, this strategy is based on the assumption that if you withdraw 4% from your investments each year, you won’t run out of money in retirement.

However, it does come with advantages and disadvantages.

ALSO READ: Securing Your Retirement Income: The 4% Rule

The second approach we covered was the “Safety First Approach”. Not a commonly used approach.

This approach is based on securing your regular income via a secure or guaranteed income source first.

For the fun things you want to do, you may place the remainder of your money in more growth focused investments.

This approach has some drawbacks and little flexibility.

ALSO READ: Securing Your Retirement Income: The Safety-First Approach

Matching Your Assets With Your Liabilities

After working 30 or 40 years accumulating assets to pay a regular income to pay for your lifestyle in retirement. It’s a new and scary experience at the same time.

For many, it can take a number of goes at achieving lifestyle rhythm in retirement. Therefore, we believe this is a time where you require flexibility over certainty.

It’s all about what’s the right fit for you and your unique circumstances. There’s not a one size fits all approach.

Asset-liability matching gives you plenty of wriggle room while you are figuring out this whole retirement thing!

Matching your deferred assets (super and investments) with your consumption.  So you can fund your living expenses in retirement.

The first step involves setting up a bucket of money to fund your initial years in retirement. An amount of money you put into non-risky investments.  Like cash, to fund your initial years of income. Depending on your circumstances this could be anywhere between 2-5 years of income.

You’d also want to make sure you have an emergency or contingency account to cover unexpected shocks.

The remaining assets/super and investments can go into an appropriate investment portfolio.

Often referred to as bucketing. You have three buckets of money.

  • Emergency bucket – Covers you when life throws you a curveball.
  • Income bucket – An amount of money to cover a certain number of years of retirement income.
  • Growth bucket – Your bucket of growth assets, like share and property.

It’s important to continually plan ahead and review this on an ongoing basis so you’re not at the mercy of investment markets.

One critical point here is to know your numbers. What is the base level of return you need to accept to get the job done? There’s no room for overconfidence here. Sadly most don’t know this number.

It’s best you look to a professional who specialises in retirement planning to help you plan this out.

Best to start planning this at least 5 yrs out from retirement and even better, if you still have the time, 10 yrs out. Early planning will ensure you have control over when you retire along with being financially prepared.

ALSO WATCH: 30 Second Retirement Income Strategy

Benefits of Asset-liability matching

  • Sequencing risk – One of the more important benefits is addressing the biggest risk for soon to be retiree’s investment portfolios, sequencing risk.  The timing of when you receive your investment returns.

Retire at a time when investment markets fall, aka GFC or COVID-19 unprepared and you’ll be forced to work longer or suffer financially.

Remember, you’re going from a life of accumulation to a life of decumulation.

At times, you are going to freak out…

When investment markets fall and you look at your balance and see it declining. You’re going to freak out from time to time.

Provided you’ve done the work upfront and put measures in place, you’ll have more confidence as your retirement journey unfolds.

  • Inflation Risk – Providing a hedge against inflation. By holding a portion of your money in growth investments you’ll have protection against inflation over the long term.

Your retirement years could last 20-30 years. It’s a long investment time horizon. You’ll still need to hold growth investments like shares and property to battle inflation risk. So your money lasts the distance.

ALSO WATCH: Investing for Retirement 101

  • Optionality – If you are someone who likes to have options and the ability to pivot relatively quickly, this option is for you.

Retirement is one of the most stressful life events you’ll experience. It’s up there with marriage, building a house and coping with the death of a loved one.

While you may not stop working, your entire world changes. It can be challenging to work out how life will change in the planning stage.

Having optionality and flexibility in the initial phases of entering retirement will give you confidence and flexibility as you navigate this major life transition.

This approach provides maximum flexibility as you figure out your retirement journey.

Why we Prefer This Approach For Our Clients?

Naturally, this is our preferred approach with clients. We know there can be many changes to plans as clients transition and settle into their new lifestyle. It provides the ability to adjust as life unfolds.

We acknowledge there is no single best strategy to plan for your income in retirement. You need to consider which is best suited to your unique circumstances.

Ready to discuss your options so you can find the right withdrawal strategy for your retirement lifestyle?

So you’re prepared with your own personal roadmap to get and keep the lifestyle you desire for the rest of your life.

Without fear of running out of money or dying with too much. Schedule your complimentary Retirement Success Session here.

Remember time is slipping away and life is not a rehearsal.

The longer you leave it, the harder, costlier and riskier it is to achieve your desired retirement lifestyle.

When you’re ready, schedule your complimentary Retirement Success Session here.

We’ll start helping you to build your personalised playbook for not only achieving your desired retirement lifestyle. But how to maintain it without fear of running out money.

Live your best life in retirement!

Glenn Doherty – CFP – Retirement Planning Specialist | Retirement Planning for Over 55’s powered by Life-Centred Financial Planning

We conduct virtual client meetings!

Schedule a Retirement Success Session

In your session we'll help you identify the retirement lifestyle you want, show you how to achieve and maintain it.

Identifying risks and opportunities so you create a road map to confidently keep you on course to live the life you want.

Schedule here

Advice Disclaimer: Any reference in this publication to the provision of advice refers to advice of a generic nature, and should not be taken as product or investment recommendations. Before any action is taken based on the information provided, independent financial advice from a licensed financial adviser should be sought. Financial Freedom Project Pty Ltd ATF GA & DC Doherty Family Trust Trading as Jigsaw Private Wealth is a Corporate Authorised Representative of Exelsuper Advice Pty Ltd. The information contained in this publication is of a factual nature only and is not intended to constitute financial product advice. Information is current as at date of publication. This is an online information blog. It does not imply an offering of securities.

Retirement Retirement Income Retirement Planning