When you’re working, your paycheck goes to cover the bills. However, replacing that working income during retirement is one of the most important financial steps you can take. Covering your expenses and maintaining the retirement lifestyle you want will be a struggle without a plan.
At Main Financial Group, our team of financial advisors in Brighton, MI, has extensive experience helping individuals and families prepare for retirement with comprehensive income strategies.
This blog will walk you through the key components of a retirement income plan, including Social Security, pensions, and other income sources.
Social Security
Social Security plays a vital role in many retirees’ income plans. You typically need 40 credits to qualify, which equals about ten years of work. Your benefit amount is based on your 35 highest-earning years and the age at which you claim benefits.
To estimate your benefits, you can use the Social Security Administration’s (SSA) online calculators or review your annual statement. Understanding these projections can help you plan more accurately.
Timing also matters. While you can start claiming as early as age 62, doing so will reduce your monthly benefit. Waiting until full retirement age (typically between 66 and 67) provides a larger benefit, and delaying until age 70 can further increase your monthly payments.
Determining the right time to claim depends on factors like your health, expected longevity, and financial needs. If you’re married, consider how spousal or survivor benefits may affect your overall Social Security strategy.
Pensions
If your company offers a pension, it can be a valuable component of your retirement income. Pensions generally come in two forms:
- Traditional defined benefit plans Provide a guaranteed monthly payment based on factors such as salary and years of service.
- Defined contribution plans: Depend on employee and employer contributions, with payouts influenced by investment performance.
Understanding how your pension benefits are calculated—and the payment options available—can help you make informed decisions. Options like a lump-sum payout versus monthly payments can significantly affect your retirement income strategy. A lump-sum payment offers flexibility and the potential for growth if invested wisely, but it requires discipline to manage the funds to avoid outliving your savings.
Main’s retirement planning professionals in Brighton, MI, can help you review your Social Security benefits and pension options to find the best fit for your needs.
Other Retirement Income Sources
While Social Security and pensions form the foundation for many retirees, additional income sources can strengthen your overall plan. Diversifying your income streams helps provide flexibility and stability during retirement.
Retirement Savings Accounts
Retirement accounts like 401(k)s, 403(b)s, and 457s are common ways to build long-term savings. After leaving your employer or retiring, you may choose to roll over your employer-sponsored plan into an IRA. Doing so can provide benefits such as a wider range of investment options and access to personalized advice. A direct rollover avoids immediate tax consequences, keeping your retirement savings intact.
At age 73, you must begin taking Required Minimum Distributions (RMDs) from traditional retirement accounts. These withdrawals increase your taxable income, even if you don’t need the funds, which can potentially push you into a higher tax bracket.
Depending on your situation, converting funds to a Roth IRA may offer tax-free growth and eliminate the need for RMDs. However, it is important to weigh the pros and cons, as taxes are due at the time of conversion.
Understanding employer-sponsored plans, IRA rollovers, and Roth IRAs is key to optimizing your savings. How you withdraw from these accounts should match your overall retirement goals and tax strategy.
Other Income Options
Some retirees explore alternative income sources to supplement their savings:
- Rental properties: Real estate investments can generate consistent monthly income, but they come with management responsibilities, potential market risks, liquidity issues, ongoing maintenance, property taxes, and insurance costs.
- Annuities: These insurance products can provide a guaranteed income stream, but it’s important to understand their fees and contract terms.
- Part-time work or consulting: Many retirees find value—both financial and personal—in continuing to work part-time or offering consulting services.
Determining the right income sources for you requires careful consideration of your lifestyle goals, risk tolerance, and long-term priorities.
Advantages of Working With a Financial Advisor
Planning for retirement income involves multiple factors and is not a one-and-done situation. With the rising cost of living, taxes, market volatility, and major life events, many see the benefits of working with an experienced financial professional like those at Main Financial Group, who can help navigate the complexities.
A seasoned advisor can assist in several ways:
- Analyze your current financial situation: Reviewing your assets, debts, and projected expenses helps identify income gaps.
- Set realistic retirement income goals: Defining how much you need to live comfortably guides your planning process.
- Develop a customized investment strategy: A skilled advisor can help create a plan tailored to your time horizon and risk preferences.
- Manage risks and market fluctuations: Staying on track during volatile markets requires thoughtful adjustments and discipline.
A financial advisor can also help you structure withdrawals from various income sources—like Social Security, pensions, and retirement accounts—to balance cash flow and minimize unnecessary taxes. Having a clear plan in place can help prevent costly mistakes, such as withdrawing too early or mismanaging required distributions.
It’s important to know how an advisor is compensated and whether they are required to act in your best interests. At Main Financial Group, we uphold the fiduciary standard, prioritizing ethics and transparency to help hardworking Americans pursue their retirement goals with confidence.
Consider Partnering With Main’s Financial Advisors in Brighton
Our team of financial advisors has decades of experience helping pre-retirees and retirees develop income strategies designed just for them and their families. We work with a diverse range of clients—including medical professionals, attorneys, executives, entrepreneurs, athletes, and engineers—who often have complex financial needs.
Through our financial planning services in Brighton, MI, we provide strategies that help you maintain your lifestyle while addressing issues such as healthcare costs, market volatility, and taxes.
Whether you’re looking for a plan that covers income needs, investment and risk management, or estate planning solutions, Main’s advisors are here to assist you.
Contact us today to get started.