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How the Wealthy Plan for Retirement

How the Wealthy Plan for Retirement

| July 25, 2017

Your approach to retirement planning may be costing you money.  

Instead of thinking of your retirement fund as a “pile of cash,” plan for the monthly income you’ll want to have in retirement.bag of cash

Common financial advice encourages you to save money and then ration out 4-5% from your 401(k) or other qualified plan each year to fund your retirement. But this strategy treats your money and your financial resources as if you were dealing with a pile of bricks.

The wealthy don’t treat their money and financial reserves this way. They understand that the key to financial control is based upon how they manage the flow of money through their financial system.

The wealthy also integrate money coming from various sources (e.g., Social Security benefits, 401(k) distributions, annuities, investments, property, inheritance, etc.) with their tax situation.

 Wealth Flow Diagram

They control how much money they receive by planning for a monthly income stream. They also minimize their tax liability and plan to have the financial resources to manage unexpected events.

Consider this…

You can have your house and car paid off, but if you don’t have a steady monthly income stream, a “retirement paycheck” so to speak, what will you live on?

If your only retirement strategy is rationing your annual income to 4% of your total financial reserves, then you don’t have much of a plan to handle a stock market drop (and capital loss in your 401(k)), inflation or a sudden need for cash – be it for house repairs or medical expenses.

There are financial strategies that will preserve your wealth in case of unexpected health expenses, inflation, stock market fluctuations and unexpected life events.

You don’t need to be Warren Buffet to enjoy your retirement, but you do need to plan ahead.

Make sure you plan to create a monthly income stream or “retirement paycheck” so you can relax and enjoy your retirement.