Are you between the ages of 55 and 64? If so, you belong to a peer group that is apparently quite concerned about saving for retirement, but not at all sure how to convert those savings into a steady income stream.
If this describes your situation, you will need to take action to ensure that you have the financial resources available to enjoy the retirement lifestyle you've envisioned.
But before we look at how you can help take control of your retirement income scenario, let's look at some interesting statistics.
A Prudential Financial study of "near-retirees," those in the 55 to 64 age group, found the following:
Eighty-three percent of those surveyed think it is very important to generate an income that can provide a comfortable retirement lifestyle, but only 20 percent say they are well-informed on how to do so.
Ninety percent of near-retirees are either guessing how much income they will have in retirement or have no idea of how much income they will be able to generate during their retirement years.
Only 15 percent of survey respondents are focused on "generating retirement income," while the remaining 85 percent are still concentrating on building a retirement nest egg, preserving their savings or working toward better returns.
Generating retirement income
If the above statistics are indicative of the national populace, it seems clear that many near-retirees are going to have to start taking action to meet their retirement income needs.
Here are a few steps to consider:
Evaluate your available financial resources. When you retire, you will probably be able to draw income from a variety of sources: Social Security, your 401(k) or other employer-sponsored plan, your Roth or traditional IRA and your other savings and investments. Well before you retire, you will want to estimate how much money you will likely have accumulated from these resources.
Calculate a withdrawal rate. Once you know about how much money you will have available during your retirement years, you'll want to determine a suitable withdrawal rate, that is, you'll need to determine how much you can reasonably afford to take out each year.
Of course, your age will help determine your choices. You typically must start taking distributions from your 401(k) or other employer-sponsored plan once you reach 70-1/2, and the size of your Social Security checks will depend on when you start taking them. Yet, you have a great deal of latitude in deciding when and how much, to withdraw from your investment portfolio.
By working with a qualified financial professional, you can determine a rate of withdrawal based on your portfolio's expected growth and your individual needs.
Consider income-generating strategies. If you are within a few years of retirement, you may want to consider shifting some, but certainly not all, of your growth-oriented investments into income-producing ones.
Consequently, you might want to look at fixed-income vehicles, such as bonds, or even an immediate annuity, which can be structured to pay you an income stream you can't outlive.
By following these suggestions, and constantly keeping "income" in your thoughts as you create an investment strategy for retirement, you can help create the cash flow you need to fully enjoy your "golden years."
Vivian Cubilla is a bilingual financial advisor with Edward Jones. Her office is located on 12575 S. U.S. Highway One, Suite 203 in Juno Beach. Contact her at (561) 799-3340.