Is Your Income Strategy on the Right Track?

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Evaluate your retirement income strategy for financial success. Discover safe money alternatives to secure your future. Start planning today! Is your retirement income plan well-suited to your financial needs and goals? Whether you’re creating a personalized strategy or examining one, it’s an important question to consider. After all, any income gaps or shortfalls could lead to real financial setbacks. With that said, here are some markers you can use to evaluate your income strategy. Evaluating Your Retirement Income Plan Are there any income gaps? Many retirement plans are incomplete. In many cases, they don’t have enough income sources to cover all monthly living expenses. If you would like to maintain your present lifestyle, it’s important to estimate what you’ll need coming in – especially when accounting for the effects of inflation. This can be accomplished by weighing projections for monthly expenses (what we think of in 30-day financial cycles, like mortgage payments and utilities) and miscellaneous costs against the income you’ll have to pay for those needs. Our “ building an effective retirement plan ” blog post can help with creating those spending projections. One key is to distinguish between sources of permanent income – or guaranteed income from Social Security, pensions, and income vehicles like annuities – and maybe income – or income drawn from more volatile sources, like stocks and bonds. Once you have done estimates for income and sources, determine gaps, if any, between your income and the needed income to maintain your lifestyle. Then it’s a matter of determining how to fill those gaps. Does your strategy rely too much on volatile investments? Retirement income planning isn’t the same as investment planning. For one, investment planning focuses on different markers, including net-worth, investor returns, and investment values. Retirement income planning uses the marker of monthly income to determine goals and means to attain them. Let’s go back to the discussion of permanent income versus maybe income. Because monthly living expenses are recurring fixed costs, an income strategy should leverage permanent income sources to pay for them. Should the market swing down, maybe income sources will dip in value – which will dilute the income you can dra