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June 14, 2021

It’s not how much you save, it’s how much you earn

So, you have saved for retirement with a 401 (k) or an IRA and have been putting money into Social Security at the maximum rate. You are fortunate enough not to have to work after retirement age and are pleased that you’ve been able to accumulate enough wealth so you can retire comfortably. But, the truth behind a successful retirement is not necessarily about how much wealth you have accumulated, but turning that wealth into generating income.
Think Money to Be Earned, Not Dollars Saved
During our earning years, many of us target a specific amount of money for our retirement. Once we save, we think our retirement planning is finished—it’s not. And using wealth accumulation as your only planning priority does not account for your monthly expenses after retirement and how you will pay for them. Paying rent, utilities, insurance, and using retirement savings for other expenses can end up leaving you relying heavily on only social security as a means of income.
What About Social Security?
An ongoing debate among investment advisors is whether to take Social Security early, as scheduled, or late. Most retirement planners agree that deferring your social security for as long as possible is best, but for some, it may not be possible because of a medical condition, your spouse’s status, or your own financial health. There is no one size fits all strategy for Social Security and it’s recommended that an investment advisor guide you through your options for social security in a personal consultation.
What About My Other Retirement Savings?
You may have a traditional IRA, a Roth IRA or a 401 (k). Maybe you have a defined benefit plan from your employer? Whatever resources you have for retirement, understand that the rules about withdrawal and taxes differ. It is best to go over these resources with an investment advisor.  After all, when Social Security was first implemented the life expectancy of men was 65 and 70 for women. Today, retirement can last up to 30 years or more as medical advances continue. So, while savings goals are important, determining how your savings can continue earning you income after retirement should be a primary focus.
To help you make the right decision ask yourself the following questions:

  1. What are your monthly expenses and can you cover them?
  2. Are you going to downsize, or do you want to travel?
  3. Do you hope to leave a legacy to your family?
  4. How will your income hold up against inflation?

These are hard questions to answer, so a visit with your investment advisor may help you get the answers you deserve.
Keep Your Retirement Income Targets Real
Once we retire, we still like to maintain our standard of living. However, since your tax bracket may be lower and you are no longer contributing to your savings,  you may require income of only 75 percent of what your earnings were while working. So if you made $100,000 working before taxes, you will need $75,000 per year plus inflation adjustments, to keep your present standard of living.
Income Earning Options After Retirement
Risk avoidance is a primary concern after retirement.  So that you are able to preserve your principle, some of the safest investments you can own that earn you cash are government bonds or certificates of deposit. Unfortunately, both types of instruments are paying historically low-interest rates right now. This environment makes an active approach to managing income more important than ever.
There are many options to consider for income earning opportunities after retirement and at least once a year, folks ought to see their investment advisor to review current income needs and how to best achieve earning enough income to continue to pay monthly bills, post-retirement.
Jared M. Elson is a graduate of the San José University with a degree in Communication and Business. Jared offers investment advisory services through Global Financial Private Capital, a SEC Registered Advisor. He has lived in the south county area all his life. He was raised in Morgan Hill, California, and he calls Gilroy his home. Jared enjoys playing amateur ice hockey, outdoor activities, reading and spending time with his family and friends.
This material is intended to provide general financial information and is not written or intended as tax or legal advice. Individuals should seek advice from their own tax or legal counsel for their particular situation. Investment Advisory Services offered through Global Financial Private Capital, LLC, and an SEC Registered Investment Advisor. Jared Elson and Global Financial Private Capital, LLC do not provide tax or legal advice.

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