Certified Safe Money Admin


Certified Safe Money Admin


Retirement Income Planning Reference Manual

Financial planning for retirement could be the most important task of your life. The process typically starts with setting money aside in an employer-sponsored or personal savings account and hoping to grow it over time.

But as the saying goes, “Hope is not a strategy.”

That’s why you must map out a plan for attaining income in retirement so that you can focus on more important things, such as spending time with family and friends, traveling, volunteering, and/or just relaxing. 

Mapping Out Your Retirement Milestones

As you get closer to your intended retirement date, you will likely develop specific goals and objectives based on generating enough lifetime income to pay your anticipated living expenses and some non-essentials like travel, fun, and entertainment. 

For many people, the retirement savings timeline will encompass four or more decades, during which the stock market will go up and down, and interest rates may change on a regular basis. So, it is essential that you put a retirement income plan together and that you review it regularly to make sure you’re still on track. One of the best ways to do this is to use various “milestones” to keep tabs on your progress.  

One of the key questions you may ask yourself is whether your savings are on pace for meeting your retirement income objectives. Like driving to a faraway destination, it can help if you know whether or not you are on the right road and how many miles you still have left to go before you arrive. 

Some financial planning experts say that having (and attaining) money milestones in each decade of your life can guide you throughout the process. These can include the following: 

Money Milestones

Decade Milestone
Early 20s Start saving at least 10% of your income in an employer-sponsored retirement plan
Late 20s By age 30, have the equivalent of one year’s salary saved
Early 30s Continue contributing to your retirement plan, but also focus on wiping away debt such as student loans
Late 30s By age 35, have the equivalent of twice your annual income saved
Early 40s Increase contributions to your retirement account to 15% or more, if applicable
Late 40s Look for additional sources of income that could be saved (this can include reducing your expenses and diverting those savings into your retirement account)
Early 50s By age 55, aim for having between four and five times your annual income saved
Late 50s Once you have turned age 50, you are allowed to contribute additional “catch up” funds to your employer-sponsored retirement plan(s), as well as to your IRA (Individual Retirement Account)
Early 60s Even though you may be eligible to file for Social Security at age 62, if you hold off until later, the dollar amount of your benefits will increase
Mid-60s File for Medicare health insurance benefits (Part A covers hospitalization and is usually premium-free; Part B covers doctors’ services and medical supplies / equipment)
Late 60s Start withdrawing income from your retirement accounts, beginning with the taxable ones first
Age 70 If you delay the receipt of your Social Security retirement benefits, you will earn an 8% “raise” (delayed
income credit) each year between your full retirement age and age 70

Source: MarketWatch

Other Items to Consider When Accessing Income and Withdrawals in Retirement

In addition to working through your retirement milestones, there are some other items to keep in mind that could impact your withdrawals and income payments. These include the following:

Additional Items to Consider When Accessing Retirement Savings

Age 55 May take penalty-free withdrawals from retirement plans, provided that they are “substantially equal”
Age 59 ½ You may withdraw funds from traditional IRA and retirement accounts without incurring a 10% IRS early withdrawal penalty
Age 62 Eligible for Social Security retirement income benefits (at a reduced dollar amount)
Age 65 Eligible for Medicare healthcare insurance benefits 
Age 66 – 67 Attainment of your Social Security full retirement age (FRA), depending on your date of birth
Age 70 The Social Security 8% delayed retirement credit stops (although you are still not required to begin your income benefits at this time)
Age 72 Must begin taking required minimum distributions (RMDs) from traditional IRAs and retirement accounts 

Source: LIMRA

Typically, retirement income will be generated from a variety of different sources. Therefore, a good retirement plan works to coordinate all of these income generators and to maximize the amount of incoming cash flow you receive from each one. 

It is also essential to be mindful of the taxes that might be due on your retirement income and withdrawals at all ages. Throughout the years, the U.S.’s top federal income tax rate has fluctuated from a low of just 7% to a high of 94%. So, having a plan in place that can reduce, or even eliminate, income tax is key.

Top Federal Income Tax Rates 1913 – 2020

Year Rate Year Rate
2018-2020 37 1950 84.36
2013-2017 39.6 1948-1949 82.13
2003-2012 35 1946-1947 86.45
2002 38.6 1944-1945 94
2001 39.1 1942-1943 88
1993-2000 39.6 1941 81
1991-1992 31 1940 81.1
1988-1990 28 1936-1939 79
1987 38.5 1932-1935 63
1982-1986 50 1930-1931 25
1981 69.125 1929 24
1971-1980 70 1925-1928 25
1970 71.75 1924 46
1969 77 1923 43.5
1968 75.25 1922 58
1965-1967 70 1919-1921 73
1964 77 1918 77
1954-1963 91 1917 67
1952-1953 92 1916 15
1951 91 1913-1915 7

Source: Inside Gov (http://federal-tax-rates.insidegov.com/)

How to Put Your Retirement Income Plan in Place

It is never “too early” or “too late” to start setting aside funds for the future so that you are ultimately able to “replace” your paycheck when you leave the working world. Because everyone’s goals are different, though, there is no single retirement plan that is right for everybody across the board. Likewise, while certain financial “tools” can be effective for some investors, they could cause others to go off track.

That’s why it is recommended that you design and implement your retirement income plan with income for life advisors who specializes in this area. A retirement income expert can walk you through all of the steps to take between now and your retirement – and even beyond. 

They can also help you find the right financial tools to help you reach your specific goals, considering your age, risk tolerance, and time frame until retirement. 

Once you have your retirement income plan in place, you will want to make sure that you keep it updated and that it corresponds to your short- and long-term objectives, as well as any changes that have taken place in your life.

Typically, retirement plans should be reviewed at least once each year. However, a review may also be needed if a major change takes place in your life, such as getting married or divorced, losing your spouse, becoming disabled, buying or selling a business, or retiring. Regularly reviewing your retirement savings and income plan can also help you ensure that you won’t leave your survivors with financial hardship if the unexpected occurs. 

If you would like to set up the foundation of your retirement plan – or if you already have a plan in place and would like to have it reviewed – feel free to contact us for a no-obligation consultation. Our retirement income planning professionals are available at [email protected].

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