Must-Do Retirement Planning Principles

In the best of all possible worlds, your retirement finances include a nest egg that generates a steady flow of income while your principal assets continue to grow.

There are six key investment points that, if you can meet them, will make retirement finances work in your favor, according to Stock Investor’s recent article, “6 Retirement Estate Planning Criteria You Must Address.”

Minimum required yield. This is the first factor when looking for reliable long term income. It’s calculated based on household income requirements and investable assets—typically IRAs, taxable brokerage accounts and other savings that are planned for retirement income. When the required percent of investment (portfolio yield) increases, so does the income risk. When the yield is too high to be practical, traditional thought is to liquidate some of your principal by gradually drawing down your investment portfolio over the retirement years or by using an insurance product, such as a single premium immediate annuity.
Income Reliability. This means the income, just like a paycheck, will be there regularly and will have a limited risk of fluctuation—and an even lower risk of being reduced or eliminated.
Income growth that keeps up with inflation. This can come from the investments organically growing their dividends over the years or from the excess income that the actual investments produce which are accumulated and then used to supplement future household income with inflation.
Liquidity. This is the ease with which investment securities can be converted into cash. It will be a high priority, if you think a need could arise that would require an unplanned tap into the principal of the investment portfolio.
Future capital preservation of the investment principal. Conventional wisdom says that retirement savings will be consumed and the savings will decumulate. Capital preservation is a priority, if you want to maintain the investment capital to meet future possible household major expenses—like assisted living costs or creating a testamentary special needs trust (a trust created at your death in your estate) to provide for a disabled child or grandchild, to provide for a grandchild’s college expenses or to donate to a favorite charity.
Surviving spouse’s ability to continue to manage retirement accounts. Usually one member of the family devotes decades to keeping an eye on the portfolio or working with a financial advisor. If both partners are involved in the family’s finances, the surviving spouse will have an easier time becoming the sole owner, when one of the two has passed away.

Reference: Stock Investor (May 24, 2017) “6 Retirement Estate Planning Criteria You Must Address”