3 Retirement Income Challenges You Might Not Consider

Author: Spencer Smith

When it comes to your retirement, you know it takes a lot of planning to live out your dreams. But when you start making the shift financially to live off your retirement savings, there’s a lot to consider. Will your retirement income last you long-term? Will you need another steady stream of revenue? How can you ever feel confident that you’ve saved enough? 

When it comes time to start taking your retirement income planning seriously, there are a few common challenges you might not consider. By thinking about these things now, you can save yourself stress and anxiety in the future when you should just be enjoying your newfound freedom. 

Retirement Income Challenge #1: Altering Your Spending Habits 

One of the hardest things about retirement income planning is all the unknowns. You’re forced to make assumptions about your spending habits that are difficult to predict. Making educated guesses to the best of your ability is all you can really do. So, how do you plan for unexpected medical costs? Loss of income streams? The unexpected need to make large purchases? 

It all comes down to the portfolio you build and the cushion you create for yourself. While it’s impossible to know everything that will happen in the future to your retirement income, the best thing you can do is to work with a financial planner to revise and update your retirement plan annually. 

Retirement Income Challenge #2: Market Fluctuations 

Everyone knows that the stock market is volatile. One day it’s up, and the next day it’s down. When it comes to retirement income planning, this volatility can drastically impact your income. When you are retiring or getting close to that time, you want to scale back your retirement portfolio to make much less risky investments. 

If you can find a way to structure your investment portfolio to support your short-term, mid-term, and long-term goals, you’ll be better equipped to handle any fluctuations. The goal is to keep at least a year’s worth of income in a relatively safe, liquid account for easy and immediate access. 

Retirement Income Challenge #3: Planning for Taxes

One of the biggest and most common shocks people experience when pulling from retirement savings is taxes. You have to make educated withdrawals on your retirement income to ensure you are making the most tax-efficient decisions. 

Meeting with a financial planner or retirement expert can help you make the best decisions when tapping into taxable accounts, like your traditional IRA or 401(k), or drawing down tax-deferred accounts first. A growing national debt could lead to higher taxes in the future. Starting at age 72, IRAs, 401(k)s, and other savings plans are subject to Required Minimum Distributions (RMDs). The purpose is to draw down your account and tax any funds that have been growing tax-free for many years. 

Depending on your needs, your age, and your goals, you’ll want to speak with your financial planner about how your taxes could increase in retirement and what you can do about it.

Get Ahead of Retirement Challenges by Planning Now

While it can be nearly impossible to predict the future when it comes to your retirement income, you need to think about it from all angles. And sometimes, your best bet is consulting a professional. By learning about the challenges you may face in the future, you can start to plan now so that instead of worrying about money during your retirement years, you can actually enjoy them. 
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