Creating a reliable stream of increasing retirement income is an especially challenging assignment in our current economic environment. Many retirees are faced with the question, “How can I generate a reliable and increasing retirement income stream?” Our 3-part Income Architecture process is a tool we use to help answer this question.
- Create an Income Foundation
First we identify and establish sources of income that will provide highly predictable and reliable income that can serve as the income “floor” throughout retirement. Most retirees already have at least one source of income that fits into the income foundation – Social Security. Other potential sources for the income foundation are defined benefit pension plans, certain life insurance annuity contracts, rental income, and even earned income. Generally, the income floor is built with sources that provide income for a lifetime.
- Inflation Stair Steps
We then build inflation stair steps on top of the income foundation. For planning and tracking purposes, we typically build these inflation stair steps in five-year increments, or “buckets.” By using appropriate time frames and some simple interest rate assumptions, a present value dollar amount is calculated for each bucket of retirement. Then, each bucket is appropriately invested for the identified timeframe. The buckets that will be used early in retirement are positioned conservatively, and the buckets that will be tapped later in retirement are positioned more aggressively.
- Ongoing Tracking and Monitoring
Last, we track and monitor each bucket in real time and determine if the overall strategy is on course. By reviewing the strategy on a regular basis, we are equipped to make ongoing adjustments and changes throughout your retirement.
The Income Architecture process gives the client a comprehensive strategy designed to provide a reliable and increasing stream of retirement income. It attempts to eliminate some of the guesswork involved in retirement income planning and adds intentionality to your investment strategy. We believe that the construction and ongoing monitoring of an income plan provides the flexibility and information needed to navigate the choppy waters of retirement income.
Do you have questions or would you like to have a conversation? Call us at 717-581-1323 or Contact Us