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Retirement Planning One Size Doesn t Fit All

For the most important financial decision of your life, you need a plan that's tailored especially for you. (opens in new tab) (opens in new tab) (opens in new tab) Newsletter sign up Newsletter (Image credit: Getty Images) By Jerry Golden, Investment Adviser Representative last updated 12 October 2022 Planning for retirement is not easy. The key to planning is to reduce the probabilistic aspects of your retirement and to effectively manage the other risks. Importantly, that process is very personal. For my next four articles, I'm going to give you the following retirement planning lessons based on what we at Go2Income (opens in new tab) have learned these past five years:One Size Doesn't Fit All - Especially in Planning Your RetirementUnderstand the Numbers - And What Contributes to SuccessPlan Should Last a Lifetime - But Should Adjust to Your Life EventsGet Your Order Right - So Do Your Planning in the Right Order

Real-Life Example of Picking the Right Size

I enjoyed a happy day of preschool shopping with my grandkids in late August. While helping them find a few items, I spotted a T-shirt style I admired in various shades of my favorite color (green) and wandered over to that rack. I considered size, the many hues of green, pondered pre-fit vs. relaxed and, of course, price.

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Fill Your Retirement Income Gaps – and Then Some Before the kids got too antsy, I chose the one that suited me best and bought it. I assume you don't care much about how I dress, but I mention this scenario to show how important it is to dismiss the concept of "one size fits all." Virtually everything can be customized to fit us individually. And that includes a retirement income plan.

New Retirement Rules of Thumb Still Have Issues

I'm not the only one who is advocating a new way of looking at planning for retirement. The New York Times wrote much the same thing (opens in new tab). In the article, finance reporter Tara Siegel Bernard quoted experts who basically said the 4% rule of thumb (a "one-size-fits-all" rule) is dead. The experts, however, proposed new rules of thumb that aren't much better. Their ideas were at least somewhat customizable to specific circumstances, but they followed the same narrow path: Pick an income goal and test it to see if it fails. If it fails, cut back on your spending.

Choppy Market Impacting Your Retirement Income Plan? Message to the experts: Your test results could fail at any time without warning, leaving retirees with no choice but to downsize. A rule of thumb isn't the best way to determine what is probably the most important financial decision in your life.

Consider Your Major Sources Of Income

To achieve your best plan for retirement income, look at all of the major sources of income that are logical for your situation and create a plan where the lion's share is in the form of safe income. That means:Understand and correctly use the different sources of income - dividends, interest, annuity payments and withdrawals (involving sales of securities) - from your savings.Select long-term planning assumptions for the markets and inflation with the understanding that you likely won't achieve them in the short term.Monitor your plan, re-project the planning results in real time and update your plan if necessary. Note: The more safe income you have, the less volatility you will contend with.

Expect Variability in Results When Planning

Let's look at how the above approach might work for a consumer who develops a plan with Go2Income guidance. We looked at the results for Go2Income plans ordered over the week ending Sept. 16. The average visitor to Go2Income had retirement savings of $1.6 million (about half was in a rollover IRA), and half of these retirees wanted to leave a legacy of their current savings. Sixty-three percent were married with an average age of 66. Based on all these stats, the average Starting Income Percentage (SIP) was 5.01%. So, did we declare victory with our new 5% rule of thumb? Nope. It's not about being the highest, it's about being the right fit. Also, the SIP is only the start (no pun intended) of a Go2Income plan. It is important because it tells you the contribution of income from your savings to meet your income goal. But a plan also needs to address inflation, lifetime income, legacy and liquidity. Even so, since it's the first thing a visitor sees, you ought to know it needs to be personalized. The SIP for these visitors ranged from 3.98% to 7.36%. There are lots of factors impacting that result, but age, gender and marital status are keys, with a male only, female only and couple averaging 5.54%, 4.87% and 4.97%, respectively.

Using SIP to Personalize Your Plan

I apologize for all the numbers, but a plan for retirement income is defined by the kind of retirement you want and deserve. One thing that shows up immediately is how the pricing of annuity payments affects your plan. With the increase in interest rates and improvement in annuity payout rates, all SIPs are higher than they were at the beginning of the year - from 4.55% to 5.01%.

In What Order Should You Tap Your Retirement Funds? And, of course, there are additional plan options you can adjust to meet other SIP or retirement objectives. For example, if you want to rely on the inflation protection of Social Security benefits or income-producing real estate, you might build in a lower inflation rate. A reduction from 2% to 1% in the assumed annual inflation would increase the average SIP from 5.01% to 5.54%. Even more than a T-shirt, the plan must be tailored just for you - and your SIP is an efficient way to set started. Are you shopping for more retirement income? The experts at Go2Income can help. Start by answering a few simple questions and receive a complimentary personalized plan (opens in new tab). This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab). Explore More Building Wealth Jerry Golden, Investment Adviser RepresentativePresident, Golden Retirement Advisors Inc.Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. (opens in new tab) He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com (opens in new tab), where consumers can explore all types of income annuity options, anonymously and at no cost. Latest 4 Ways You Can Take Advantage of a Down Market With markets down for the year, it may seem that all the news is bad. But now could be a good time to make some profitable moves. By Adam Grealish • Published 11 November 22 New, Used or Leased: Is Now the Time to Buy an Electric Vehicle? The Inflation Reduction Act created new tax breaks for electric vehicles. Here's a guide to which EVs count and the best time to buy. By Rivan V. Stinson • Published 11 November 22 You might also like 4 Ways You Can Take Advantage of a Down Market With markets down for the year, it may seem that all the news is bad. But now could be a good time to make some profitable moves. By Adam Grealish • Published 11 November 22 Finding Peace of Mind With Your Retirement Income Even in tough times, you can secure retirement income that lets you maintain your lifestyle, lasts a lifetime, adjusts for life events and leaves a legacy for the kids. By Jerry Golden, Investment Adviser Representative • Published 10 November 22 What to Do When an Unhappy Customer Threatens to Ruin Your Rep Some customers go too far when they feel they haven't been treated well, demanding unreasonable make-goods and even resorting to extortion. An attorney offers some advice. By H. Dennis Beaver, Esq. • Published 10 November 22 Rising Interest Rates Change the Math on Pensions for Some Would-Be Retirees Now is a good time to think about when and if to take a lump sum on your pension and what to do with it. Let's explore the pros and cons. By Michael Aloi, CFP® • Published 9 November 22 Counterattack: Tips for Thwarting a Will Contest From contentious relatives to scam artists, wills are not immune to the threat of a contest. If you have an inkling such a fight could be in your estate's future, here are some ways to limit the risk. By Linda Kotis, Esq. • Last updated 10 November 22 5 Steps to a Stronger Financial Plan It's impossible to be right all the time, but a strong plan and constantly assessing where you are can help you pivot when bad things inevitably happen. By Eric Roberge, Certified Financial Planner (CFP) and Investment Adviser • Published 8 November 22 Safe Harbor 401(k)s Can Help Small-Business Owners Keep Happy Employees Immediate vesting and contributions by the employer regardless of the employee's participation pump up workers. Employers get lower costs and tax benefits. By Mike Piershale, ChFC • Published 8 November 22 5 Survival Tips for the Bear Market It's been a painful year for investors, but focusing on the long term and implementing constructive actions can help weather the turbulence. By Daniel Kern, CFA®, CFP® • Last updated 8 November 22 View More ▸ kiplinger About Us (opens in new tab) Terms and Conditions (opens in new tab) Privacy Policy (opens in new tab) Cookie Policy (opens in new tab) Kiplinger is part of Future plc, an international media group and leading digital publisher. Visit our corporate site.
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