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Paying Yourself In Retirement

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Retirement Planning

Personal Finance

March 2, 2023

Take these six tips to plan for a more comfortable retirement

We’ve all heard the phrase “pay yourself first” but as easy as it sounds, we don’t always do it. When it comes to retirement, adequate preparation over the long term is key. You must make sure there’s enough money to carry you all the way through those years.

But understanding how savings will turn into a reliable stream of income that will provide support through potential decades is easier said than done. What must you do to plan to pay yourself throughout retirement? Take these top six tips to help with your retirement planning.

Know Your Reliable Income Sources

It is number one to know where your retirement income will come from. You may have Social Security benefits, a pension, or even annuities. You may also have rental properties, an IRA, or a side job you plan to hold onto. All of the income sources must be identified to understand exactly the income projected for each month. These sources and amounts per month need to be mapped out and calculated

Maximize Social Security Income

A valuable source of income in retirement is Social Security benefits. When you log into your Social Security account and review your benefits, you will be able to view options for retirement and consider when to start taking those benefits. Postponing these benefits by a year or two could make a huge difference and maximize your income.

Pay Fixed Living Expenses from Guaranteed Income

Those expenses that occur every month are fixed. Guaranteed income is money that comes in each month for the rest of your life, such as payments from a pension or annuity. The key is to pay all fixed living expenses from income that is guaranteed, to avoid using retirement accounts for monthly bill paying. Your retirement account funds can and should pay for the things you want to do with your free time, not fixed expenses.

Keep Investments Invested in Market Downturns

It's a good idea to have two or three years of cash set aside in a bank account to avoid needing to access retirement funds and sell out of investments at times when the market is not performing. Any cash on hand could also be used to purchase more investments during market downturns. It may be a good idea to take RMD withdrawals monthly rather than all at once as well to avoid needing to take one lump sum and being faced with uncertain markets.

Be Especially Mindful in Year One

It is all too common to finally reach retirement and want to splurge on anything and everything you’ve been waiting for years to accomplish. Year one of retirement can easily create serious setbacks if you aren’t careful. Create a limit for the portion of your portfolio you will use for extra expenses and stick to it. It may also be helpful to remember that any pre-tax funds will also require an end-of-year tax payment.

Ask for Guidance

Most importantly, consult your financial advisor on retirement planning and strategies to pay yourself throughout retirement. Perhaps the most important piece when it comes to creating a comprehensive retirement plan is having a reliable income stream built to last a lifetime.

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At Bayntree Wealth Advisors, we understand that every client has unique financial goals. That's why we take a personalized approach to financial planning, working with each client to create a plan tailored to their individual needs and objectives. Ready to get started on planning for your dream retirement? Click here to schedule a call.

Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance on your individual situation.

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