Retirement Income Planning ebook

RETIREMENT INCOME
PLANNING

The following will guide will provide you tips to ensuring your retirement income plan includes
guaranteed income and growth potential, diversified retirement income to prepare for life's
financial ups and downs and point you to the right resources to consider when working on your
retirement income plan.

www.peaktrustfinancial.com

One size does not fit all

One size does not fit all when it comes to
retirement planning. While you may
consider yourself an active senior,
traveling the world and going to the gym,
others may want to stay home and tend
their vegetable gardens while reading a
good book.

Whatever your plans may be, it is
important to consider the way you spend
your retirement. Some things to consider
while planning your retirement are
current savings and expenses, healthcare
needs, family, and values.

No matter your situation, the good news is
we can help you feel more confident in
your retirement savings and lifestyle. The
following lists three basic building blocks
for planning your retirement income.

We believe a strong retirement income plan should provide three key elements:

A guarantee that your core expenses are covered
Income growth potential to meet your long-term needs
The ability to adjust your income plan over time as your needs change

Step 1

Pay for your essential expenses
with guaranteed income*

When developing a plan, the first thing you need to think about is your day-to-
day expenses. In case you have not done this, come up with a simple budget.
Include all your core expenses, such as housing, food, utilities, taxes, and health
care. From here, you can begin to build a plan that assures those costs are
guaranteed to be covered over your entire lifetime.
What guaranteed sources of income are included in this plan?

Social Security

For most people, social security benefits are the core of their retirement income.
What many people don’t realize is that the timing of claiming your benefits is
related to, and just as important as, the amount you are taking. For example, you
may be tempted to claim your benefit as soon as you turn 62, the minimum
eligible age. However, if you begin taking Social Security at 62, rather than
waiting a few more years, your monthly benefits are significantly reduced. We
can help explore the perfect timing to claim your Social Security benefit and
how that fits into your overall financial plan.

Getting paid to wait

Illustrative Social Security benefits by claiming age

CLAIMING AGE MONTHLY BENEFIT

Pensions

While not as common as they used to be, over 12 million people in the United
States have a distinct benefit pension plan, according to the Pension Benefit
Guaranty Corporation.1 If you have a pension plan, you'll want to weigh the
benefits of how you withdraw the money—as a stream of income or as a lump
sum. Those who do not have a pension have other ways to create pension-like
income streams.

Fixed income annuities

A fixed income annuity is a contract managed by an insurance company that, in
return for an upfront investment, guarantees* to pay you (or you and your
spouse) a set amount of income either for the rest of your life (and the life of a
surviving spouse in the case of a joint and survivor annuity) or a set period of
time. The good thing is that you will know how much income you (or you and
your spouse for joint contracts) will receive each year at any age you decide to
take withdrawals.

Fixed income annuities

There are different types of income annuities you may consider:

Immediate and deferred income annuities offer fixed payments that continue
and don't change regardless of what happens in the financial markets. Just as
the name implies, immediate income annuities begin paying income
immediately; Deferred annuities begin on a specified date in the future.

A fixed deferred annuity with a guaranteed lifetime withdrawal benefit
(GLWB) offers a future income amount guaranteed to increase on each
contract anniversary for a set period or until your first lifetime withdrawal,
whichever comes first.

Regardless of the type of income annuity you choose, there are a couple of things
to keep in mind. You may give up access to the savings you use to purchase an
immediate or deferred income annuity, so you should consider having other
money available for unexpected expenses. You should also note that if you
purchase fixed annuities, you also forgo any growth potential for this money.

While each type of annuity offers an attractive mix of benefits, you should work
with a financial advisor to help determine which annuity or combination of
annuities is best for you in building a diversified income plan.

Step 2

Meet longer-term plans with
investment growth

Unfortunately, your retirement dreams come with a price. You'll want to
consider how to pay for those things you have dreamed about doing when you
finally have the time, including vacations, hobbies, and other things.
It is a good strategy to pay for these types of optional expenses from your
investments. That way, if the market has a downturn, you have the option to
reduce expenses as needed.
Inflation can be your biggest enemy as you plan for your financial future. One of
the primary ways to fight it would be to include growth-targeted investments as
a part of your income plan.

Without taking on undue risk you may want to consider balancing your
investment portfolio with a mix of stocks, bonds, and cash. Since there are
several considerations to make before deciding on the right mix, an investment
advisor would be recommended.

Your financial advisor can help you consider such things as your current
financial situation, time horizon and your ability to tolerate risk as the market
shifts up or down. Managing your investments in retirement requires effort and
discipline to stay on track.

If you decide to take on the task of planning your own finances, research your
investment options carefully and choose investments that align with your goals.
Remember that investing is not a ‘set it and forget it’ project. You will need to
monitor your investments, rebalance them and determine if they provide the
right mix of risk, reward and tax management.

Tip: If you don’t have the time or inclination to manage your own portfolio, a
professionally managed account might be a better option.

Step 3

Your plan should be adaptable
and adjustable

If anything is certain in life, it is change. Parents, children, grandchildren,
weddings, funerals, retirement. We all go through changes in our lives, and all
we can do is try our best to plan for them. When life happens, it is important to
have a plan that allows for adjustments as you go.
Planning for change becomes more realistic when you combine income from
several diversified income sources in retirement. These income sources can
work together to reduce the effects of some important major risks, such as
market volatility, inflation, and longevity.

Once you reach a certain age, you might want more flexibility when you start
taking on the Required Minimum Distributions (RMD). If you plan to spend
your RMD to cover ongoing expenses after retirement, an advisor can help you
determine tax-efficient ways to take those withdrawals each year.

While you are weighing investment options you want to pursue, consider this:
Although taking withdrawals from your portfolio gives you the flexibility to
change the amount you withdraw each month, it doesn’t guarantee income for
life. Conversely, income-based annuities provide an assured income for the rest
of your life but may not provide as much flexibility or income growth potential.

Preserving your principal

When meeting with clients in
retirement, the most common issue
we hear is "How do I protect my
principal?". As the stock market teases
with all-time highs, it’s important for
investors—especially those in
retirement—to avoid losing capital as
the market fluctuations. This is where
principal protection comes in.

As part of your overall financial plan,
you may want to preserve your
principal for use in an emergency or
to leave a legacy for your heirs. This
can be accomplished separately from,
or in conjunction with, a diversified
income plan.

Remember — such as money market funds, CDs, or treasury bonds—typically
offer relatively low yields. This means your principal may not be large enough to
generate a sufficient income from interest or dividends to fund your preferred
lifestyle. Invest too conservatively and your savings may not grow enough to
keep up with inflation.

Building an income strategy has
tradeoffs. Do you understand them?

Everyone's situation is unique. There is no one income strategy that will work
for all retirees. You'll need to determine the relative importance of growth
potential, guarantees, or flexibility to help you pinpoint the right retirement
strategy for you. It is important for you to know the tradeoffs before you decide
and understand when it is necessary for more growth potential versus less
guaranteed income. Look into your family’s health history and longevity to
determine your plans for leaving a legacy.

How to get started

So, how do you get started? Here are 5 steps to consider when creating a
diversified income plan:

1.Identify your personal and financial goals.
2.Complete a retirement income plan to determine the probability that you will

have enough money to last throughout retirement.
3.Determine when to take Social Security, how much of your investment

portfolio you want to allocate to an emergency fund, focus on income
protection (via annuities) and growth potential, and who will manage your
investment portfolio.
4.Implement your plan with the right mix of income-producing investments to
balance your financial needs and investment priorities in retirement.
5.Set up regular reviews with your Peak Trust advisor to make sure your
investment plan is on track to help meet your lifestyle and income needs.

Next steps

Do an assessment of your retirement income needs
Get family input at your discretion
Thoroughly ask questions

Peak Trust Financial Group is dedicated to ensuring that people in, or near
retirement have the necessary plans in place to provide for their financial well-

being and peace of mind.

2800 North Dallas Pkwy Plano, TX 75093 972-380-1119
800-513-3243

[email protected] www.peaktrustfinancial.com

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