Anthony Engrassia

Anthony Engrassia

Planning reduces stress over post-retirement income

By Anthony Engrassia
Business Columnist

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During your working years, your top priority is to build retirement savings so that you can have a consistent, sustainable income afterward. However, as you approach retirement, it only is natural to be anxious about your finances – to be worried that you didn’t save enough and will run out of money too soon.

One key to minimizing stress about finances is having a plan so you know what to focus on in the final years before retirement. To prepare that plan, ask yourself four questions:

  • How much income will you need? The easiest way to determine how much money you need is to add up your monthly expenses. You might find that you end up living on less because your expenses decline. But also take into consideration your plans for the large expenses you’ve been saving for your entire career, such as travel, a vacation home or other amenities.
  • What should my portfolio look like in my retirement years? Many workers have amassed substantial retirement savings in tax-deferred retirement accounts such as 401(k)s and traditional individual retirement accounts. Distributions from these accounts are taxed as ordinary income, which is why some workers weigh converting some of those assets to other vehicles. Another concern is making sure your portfolio keeps pace with, or ahead of, inflation so you don’t lose purchasing power over time; you’ll want to shift your portfolio accordingly.
  • How will I manage health care? If you plan to retire before age 65, Medicare will not be there for you; you’ll want to ensure that your group health plan will extend certain benefits to you when you retire. Keep in mind that if you have Medicare, your out-of-pocket expense still could be sizable. You also might want to consider how you will fund long-term care, if needed.
  • Where will you live? Moving to another state might lessen your tax burden, and downsizing your home might reduce your monthly expenses. Ideally, you’ll want to retire without a mortgage, but if you are still paying off your home loan, you might want to investigate if refinancing is a smart choice.

Remember, the key to a successful retirement transition is planning long before needed. Don’t wait until the first day of your retirement to meet with your financial adviser. Regularly consult with him or her so you can adjust your plan and incorporate a strategy to stretch your income through your retirement years.

Anthony Engrassia is an investment adviser representative for Mutual of Omaha Investor Services.