Terri Trantow
Appleton Post Crescent
May 2, 2010
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Having a substantial nest egg doesn’t automatically provide the right kind of funding to sustain a person’s income needs during their golden years. After an entire working life focused on reaching the magic number they’ll need, many retirees have no idea how to turn that amount into an income stream.
Going from saving for retirement to maintaining it often requires a change in mindset. The goal in managing retirement income is consistency. Rather than looking for the spikes (and valleys) that came with growth, the retirement years are about repeat returns that ensure a consistent revenue stream.
Many investment advisers find their clients’ lifestyle goals to be among the biggest factors influencing the ability to maintain a retirement income, although the goals often are tempered as retirement approaches. (For instance, someone in their 50s dreaming of spending winters in Florida upon retirement may find the costs associated with that to be beyond what they can comfortably maintain for an extended period.)
Other elements such as inflation and interest rates come into play, as do mandated minimum distribution requirements affecting most current retirement plans.
Retirees also need to make sure their anticipated income will fit their risk tolerance. Someone who prefers to invest conservatively, for example, probably shouldn’t expect a $1 million retirement fund to sustain annual withdrawals over the long term.
Investment advisers will look to diversification and variety in income sources such as dividends and interest when restructuring a retirement plan for income rather than growth. While specifics are unique to each client, it’s generally a good idea to expect a shift in focus at least five years ahead of a planned retirement to protect the funds from equity market volatility. Many investors near retirement in 2008 learned this lesson too late, with some taking as much as a 20 percent to 30 percent hit on their funds.
If you’re planning to retire soon, make sure managing your retirement income is part of your next conversation with your investment adviser.
Terri Trantow is market president for Johnson Bank in Appleton. She can be reached at ttrantow@johnsonbank.com.
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