2 (Crucial) Reasons For an Income Floor in Retirement — Never Outlive Your Money + Permission to spend it all

(check out the video of this blog, too!)

If you ask retirees and people approaching retirement what their biggest concern is in retirement, you will almost unanimously hear the same concern emerge….

The concern of running out of money in retirement.

Imagine just how awful it would be to see your retirement account hit $0 knowing that you still have life to live?!

Not a situation I want any of my clients to EVER be in.

That’s why the focal point of retirement planning (especially the distribution phase of retirement) should be centered on income planning and ensuring that people do NOT outlive their money in retirement.

It just makes sense to address the top concern FIRST.

So, you can just follow the 4% rule and make sure you don’t take more than 4% out of your portfolio (especially in the first 10 years of retirement), but that still leaves you at risk of running out of money about 14% of the time (unless you have $15 Million or more saved for retirement).

For my clients, a 14% chance of running out of money, is still WAY too much.

That means approximately 1 out of 7 clients would outlive their money.

To me, that’s unacceptable.

I don’t ever want to get that phone call, knowing that there was something I could’ve done to prevent that.

So how do you ensure that you never run out of money in retirement?!

It’s simple.

You create an income floor for yourself in retirement.

An income floor is simply a guaranteed income source, that will last your entire life.

It will likely include social security (which you can get tax-free if you’re smart about it), or your company’s pension (if you have one), but the priority here is to set an income threshold that will provide you with enough income to cover all of your necessary living expenses in retirement and that will be GUARANTEED to last as long as you are alive.

Following a strategy like this, does 2 very important things for you in retirement:

#1 — It Gives You A Guaranteed Lifetime Income Source (that you can never outlive)

This guarantee gives you peace-of-mind.

You will NEVER have to worry about running out of money in retirement.

Ever.

If you happen to spend too much in a given month, you just walk out to the mailbox at the first of the next month and pickup your next monthly income check.

This means that you don’t have to worry about what the market is doing, or what’s going on with the economy.

You can simply enjoy your retirement.

And just to throw a cherry on top…. it’s been proven that people who have guaranteed income in retirement enjoy their retirement more (because there is no real stress), and this consequently enables them to live longer!

#2 — It Gives You The Freedom to Spend (all of) YOUR MONEY!

This aspect often goes overlooked, but if you have an income floor for yourself (maybe it’s $5,000/month, maybe it’s $20,000/month, whatever it is for you) this gives you the FREEDOM to spend your other assets.

All of them.

If the balance of your other assets reaches $0 you STILL have that guaranteed income source for the rest of your life!

People that haven’t set an income floor for themselves are often required to keep their nest-egg of assets (locked up), just so it can continue to produce…INCOME…

To continue to produce INCOME, the money can’t be touched.

This means that a large portion of your hard-earned retirement assets can’t ever be spent in retirement.

They must remain invested to be able to spin-off income for you.

Contrarily, if you create a guaranteed income floor for yourself, you will have given yourself the freedom to spend every last dollar in your retirement accounts and STILL not have to worry about running out of money, because the checks will just keep rolling in.