Building your income plan in retirement is very much like building an actual house. It has to start with a solid foundation before we can build on top of it with the living space and attic. It’s key to understand what your foundational income consists of in retirement. You need a professional to help you put together the blueprints for your income, both the foundational level and the living space and attic above the foundation.
Understanding Your Foundation
Think about it for a minute. If you live in the South, you’ve likely seen the remnants of a house after a tornado has ripped through the community. What does it leave every time? The foundation is always still there. It may be that everything else is gone, but the foundation will still be intact. You want your required income to be that predictable, regardless of what financial storms might come your way in retirement.
When John, my business partner, was building his house, he stopped by one day while the crew was at work. In a good-spirited way, he gave the builder a bit of a hard time because John couldn’t see that they were doing much beyond “playing in the dirt.” What came from that conversation was the realization that they were actually establishing the foundation of the house. The builder made it clear that, if the foundation was not solid, nothing else would matter; it would all fall apart.
What’s your foundation in terms of your retirement income? Most people’s foundational income consists of Social Security for both spouses. Some may also have a pension or two, but Social Security is often all there is in terms of guaranteed income.
Go to a Professional
Just like John needed a builder who knew how to establish a solid foundation, retirees need a professional to help them plan their foundational income. If you are a regular listener to The Get Ready for the Future Show, you have heard us say that there are around 2,700 rules that govern Social Security. Of course, it can be confusing!
By the way, to add to the complexity, the Social Security Administration states in their handbook that their employees are not allowed to advise you on which claiming strategy to use. Can you imagine building a house without a professional to guide you through the process of building a solid foundation?
There is too much on the line to leave this decision to chance. We have seen minor changes to Social Security plans add $500/month in foundational income for some of our clients. Over a lifetime of withdrawals, that’s a lot of money. At GenWealth, we utilize the information that you provide from the Social Security Administration about your benefits to build a plan for your foundational income in retirement. It’s personalized for you, and unique to your details.
It’s key to understand at this point that the house is not complete with just the foundation. We know you want more income beyond Social Security, and it’s likely that you’ll need more than just Social Security. It all has to work together in your plan. Imagine building your foundation without thinking about what the upper floors would look like! The foundation is based on what everything else is supposed to look like on your house, and your income is no different.
Build On Top of Your Foundation
Once the foundation has been planned, we want to be sure there is more income beyond that. It’s the living space in your home, the part where you have fun; this is your desired income. Beyond that, you have the attic. Think about it; that’s where all the stuff is for the next generation. It’s important to have plans for your desired income and for your legacy, but none of it matters if you don’t have a solid foundation. We can’t build on top of something that is unstable or non-existent.
Many people ask us if we believe that Social Security will be there for them.
- Yes, or I wouldn’t have spent the time to write this blog!
- Yes, or we wouldn’t spend the time to plan for so many people’s Social Security income!
- Frankly, Washington has “fixed” Social Security several times in the past with small tweaks here and there. They will do it again. Why? People who are worried about Social Security vote, and politicians want nothing more than to get re-elected!
Based on the premise that Social Security will be there for you, now what?
- If you are 5-7 years out from claiming Social Security, meet with an advisor who can analyze your Social Security and develop a plan for you.
- Work with that same advisor to develop a plan for the rest of your retirement income.
- Remember that the foundation has to work with the rest of the house and vice-versa.
- Get your retirement income blueprint on paper!
The bottom line is: A firm foundation is vital, but if that’s all you build, in all reality you won’t have much of a home. Each aspect of your financial plan should function together like a beautiful, custom-built house just for you. And if your financial plan doesn’t work that way, it’s time to find an advisor to help you put a plan together that does. If you need help along the way, the GenWealth Team is here for you!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.