With all the attention on saving for retirement, it’s easy to overlook another important activity: creating a plan to pay yourself in retirement.  More than ever, pre-retirees—especially those who don’t have a pension—will have to rely on a combination of income sources to pay for their essential and lifestyle expenses in retirement. Whether you retire in the Augusta area, or elsewhere here are some tips to consider as you design your plan.  

Create a plan.  A recent Ameriprise Financial study found that more than half of pre-retirees report feeling overwhelmed and anxious about their impending retirement and worry that they will run out of money. The good news is that those with a retirement income plan are more likely to feel confident about their financial future. You too can take action to help lessen fears about the unknown. 

Project your expenses. To cut yourself a “reality check”—one that covers your monthly bills—first tally your expected retirement expenses. Next, consider your retirement lifestyle. Do you plan to travel? Spend more time with your grandkids? Start a small business? Expenses in retirement are personalized and may vary over time, so make sure your budget aligns with your goals. 

Make a list and check it twice. Most retirees will have multiple potential sources of income available in retirement. Make note of all your assets and income streams such as Social Security, stocks, bonds, Certificates of Deposit (CDs) or annuity income. Round up your IRAs or 401(k)s and potentially consolidate accounts if it makes sense. 

Understand the impact of taxes. Once you hit retirement, taxes may impact you differently.  To avoid surprises, ensure taxes are a part of your retirement income plan, especially unique state taxes (Georgia and South Carolina have different exemptions on income and property tax for retirees. The plan should address Required Minimum Distributions (RMDs), or the minimum amount of money you must withdraw from your retirement accounts each year after age 70 ½.  If RMDs are calculated incorrectly, you could face tax penalties. Talk to your tax advisor about RMDs and other strategies to help minimize your retirement tax bill.

Diversify. Markets move up and down, which means investment income may vary. Spread your risk with a diversified portfolio, and ensure you understand the investments you hold. Revisit your allocation periodically to make sure you are well positioned to handle any volatility.  

Give yourself flexibility. Ensure you have a balanced portfolio to allow yourself flexibility to weather the unexpected events that may occur in retirement. Consider your mix of the following investments: those geared toward generating income, stable investments that are less likely to change in value, and investments that are easy to convert to cash for an emergency. As you plan out your income, also identify assets to draw down first for maximum flexibility. 

Time is on your side. The sooner you start thinking about how you’ll pay yourself in retirement, the better off you’ll be. To make it easier, tackle the tasks one at a time and allow yourself the luxury of carefully thinking through your retirement goals and financial scenarios.  

Work with a professional. Consult a financial professional with experience creating reliable, lasting income strategies in retirement. 

Will Rogers, ChFC^®, CFP^®, APMA^® is a Financial Advisor and Certified Financial Planner^® practitioner with Ameriprise Financial Services, Inc. in Evans, GA. He specializes in fee-based financial planning and asset management strategies and has been in practice for 25 years. To contact him, please visit www.WRogers.info