One of the most stressful aspects of retirement can be transitioning from earning income to relying upon investments and other possible income sources to meet income needs.
You have put years of hard work into your medical school and training, given most of your life to caring for your patients, and may now find yourself contemplating, or already in, retirement.
Transitioning from earning income to relying on your investments and other possible income sources to meet your income needs can be one of the most stressful aspects of retirement.
Below are 10 steps that may assist you in gaining a level of confidence and clarity around cash flow planning in retirement:
Dr. and Mrs. Smith are about to retire and are planning their retirement cash flow strategy. Below are the 10 steps that were utilized to transition into retirement.
1. Dr. and Mrs. Smith used a retirement expense sheet to list their overall expenses in retirement and determined what they would need to cover all of their needs and wants.
2. Next, they divided their expenses into essential and non-essential.
3. They estimated total taxes to be 20%.
4. An inflation factor was used to plan for the future increase of goods and services.
5. Once they determined their gross and net income needs, they listed all of their guaranteed income sources:
6. With the expenses and taxes listed, along with the income sources, the income gap could be calculated for the Smiths.
7. With the income gap calculated the Smiths reviewed their investment portfolio and calculated the withdrawal rate.
8. The Smiths would then work with their financial advisor to determine a strategy to withdraw the 2.49% utilizing dividends, interest payments, and if applicable annuity payments.
9. Once the specific dollar amounts are determined for the various investment accounts the Smiths would instruct their advisor to withhold federal and state tax on any accounts that would produce ordinary income, retirement accounts and annuities.
10. The last step for the Smiths to put their retirement cash flow plan in motion would be to choose a bank or brokerage account to have all of their guaranteed income sources and portfolio withdrawals deposited into so they can concentrate on enjoying retirement and not how they will pay for their monthly expenses.
Like the Smiths you can enter retirement feeling confident by following the retirement cash flow steps above.
This case study is for illustrative purposes only. Individual cases will vary. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Prior to making any investment decision, you should consult with your financial advisor about your individual situation.