UNDERSTANDING INCOME MANAGEMENT

Twenty-five years may seem like a long time until retirement, but those years coincide with the prime earnings years, tempting people to spend more than they should.

Things to consider:

• Asset growth can be pursued.
• Some assets can be leveraged, allowing others to seek more aggressive growth.
• College and children's wedding expenses can erode retirement savings.

Seeking retirement income security while meeting current needs may seem like a balancing act. This may be complicated by the fact that needs change throughout a person's working life, requiring periodic reassessment of the individual's portfolio.

Things to consider:

• Protecting assets begins to assume more importance.
• Important decisions, such as early retirement should be discussed.
• Retirement savings may have been eroded from child educational expenses, weddings, etc.

What a retirement income portfolio looks like will be highly dependent on a person's retirement goals. This example is for someone for wants to volunteer, so they need to cover most of their basic expenses themselves. It might also work for someone who wants to start a business. The portfolio would not work for someone who desires to travel often, they would need higher Discretionary Expenses.

Things to consider:

• Volunteer work.
• Travel.
• Long-term care is not covered under Medicare.
• Emergency funds should be set aside.
• There is a desire to leave a legacy to family or charity, so life insurance is used to allow for more giving.

Many people just can't give up an active work life altogether. For someone who has decided to work as part of their retirement, a different portfolio would be required. Let's assume this retiree receives 40% of his income from Social Security and pension and 60% from a consulting business started shortly after retiring.

Things to consider:

• Continue to have discretionary expenses to cover travel and entertainment.
• Fixed expenses can be slightly reduced, as house is paid off and he lives alone.
• Healthcare expenses.
• Emergency expenses.
• No significant legacy plans.

As people get further into retirement, they begin to relax more and take things a little easier.

Things to consider:

• Discretionary expenses are reduced as life slows down a bit.
• Fixed expenses become the biggest allocation.
• Healthcare expenses are more prevalent.
• Emergency expenses should be maintained.