Author’s note : this blog
originally began as a weekly supplement to my online personal finance class.
Based upon interest I have resumed occasional blogging
about retirement issues .
This is the first in a series of new posts. Please feel free to email the author or comment.
This is the first in a series of new posts. Please feel free to email the author or comment.
1.
How much
is my house worth?
2.
What is the balance in my 401k fund and other retirement assets?
3.
How much did my
money grow this year?… fortunately in 2017 for must of us the answer is a
lot.
4.
How should I
allocate my assets between stocks
bonds etc. based upon my age?
What’s wrong with the above questions?
There is nothing per se wrong with
these questions. What’s wrong is
that most those
planning
the wrong viewpoint or
focus. Their focus is on wealth and wealth accumulation. The really
successful investors and best retirement planners change this
viewpoint when creating plans for retirement. . Their focus moves to retirement cash flow. It’s a
subtle difference. However when your
vantage point is cash flow rather
than wealth accumulation, this alternate viewpoint
leads to looking at the problem differently and may change the decisions that you make to be successful
with your plans..throughout retirement.
Don’t you need wealth
to have cash?
1.
Generating an income stream for yourself in retirement
2.
Providing
for you heirs. etc
3.
Other
Here is where there wealth fallacies start. Example Your Investment percentage in equities should be 100 minus your age. Is this terrible advice? No! Its meant to say that your earnings have stopped you need this accumulated wealth to last so you can’t risk as much money. 100% true but this “rule” assumes that your only source of retirement income is your investment portfolio.
A cash flow viewpoint looks at all the cash flow you will have in retirement
- Pensions
- Social Security
- Draw down from accumulated wealth (investments) for example your required distribution from your 401k or IRA plan.
- Other
If like many to be retirees
you have
significant future income in your retirement from Social Security and
Pensions the cash flow oriented viewpoint has you ask different questions including
- How do I balance my current projected income from the potential of increased future inflation which will cut into my purchasing power i.e. enjoyable retirement
2. When should I actually start drawing each of the of the above benefits… pension, social security , 401k withdrawal? (RMD) In order to maximize their benefit in total for me.
So what’s the answer?
The answer is that
the solution is unique to
every situation and person.
However the methodology for arriving at the right solution for you is the same for everyone.
However the methodology for arriving at the right solution for you is the same for everyone.
My solution was not
the same as that for my friends with whom
I shared this methodology. It’s
no secret.. it was just helping them organize their information in a simple
cash flow oriented viewpoint and then
thinking through the decisions that were
right for them .
I’ll blog more on
specifics soon. But for now start thinking about cash flow and ask yourself these questions to get
started.
- How much will my social security check be if I take it at 62? 66 ( or full retirement age) or 70?
- What are all the options for taking my pension in terms of when and cash flow?
- If I were 70 ½ today how much would my required minimum distribution be from my 401k (IRA) this year . Assume current value of plan.
KNOWING THE
ABOVE WILL ALLOW YOU TO START
LOOKING AT YOUR RETIREMENT FROM A CASH FLOW VIEWPOINT.
More to Come
More to Come
