Rethinking retirement strategies

Vernon’s latest is “Don’t Go Broke in Retirement: A Simple Plan to Build Lifetime Retirement Income” (Rest-of-Life Communications). The virtue of this small book is its simplicity in guiding you through a three-step program to create a stream of retirement income that won’t be devastated by stock market volatility or potential future inflation.

Vernon’s book offers simple steps for creating an income stream from your retirement savings, instead of spending your savings and running out of money before you run out of time. You may have to make some tough but informed decisions about your retirement lifestyle. But once enacted, this plan means you won’t live in fear, hoarding your money without enjoying your retirement. Or winding up broke in your old age!

Here’s a preview of Steve Vernon’s three-step “Spend Safely Strategy.”

— Create a reliable monthly income/paycheck that will last as long as you live and won’t be impacted by a stock market decline. (Making wise decisions about Social Security is the core of this strategy.)

— Set up retirement “bonuses” to supplement those retirement “paychecks” by creating a Retirement Income Generator (RIG) that will cover additional desires and discretionary purchases in retirement beyond your regular monthly retirement “paycheck.”

— Build a cash stash. That’s what Vernon labels this emergency fund set aside safely in an insured account at a bank or credit union. (I’ve always called it “chicken money.”) The goal is to have a liquid amount of assets to cover unforeseen expenses, like uncovered dental bills. The secondary benefit of having this cash stash is that you can stick with your income-generating investments, knowing that you have cash for emergencies.

But how do you actually put this strategy in place? After all, we know we are living longer, medical costs are rising, and the stock market is volatile. There are so many uncertainties. That’s where this practical guide helps you put your plan into action.

There’s a key chapter on Social Security strategies, whether you expect a long life or have health challenges that could diminish your longevity. Waiting as long as possible to take Social Security not only gives you a larger immediate paycheck. It also gives you a higher base for future inflation adjustments. Making the correct first decision about Social Security timing could impact your retirement income by over $100,000 according to Vernon.

Anyone who has managed to save for retirement in a 401(k) or IRA knows that the government requires you to withdraw a minimum amount of money (RMDs) each year, starting at either age 70 1/2 or 72, depending on your birthdate. But how you calculate and withdraw those RMDs is another critical decision on which Vernon offers practical advice.

He explains how to adjust your calculations using systemic withdrawals to create the RIG that forms the second part of your lifetime income strategy. And he covers topics like immediate annuities and even reverse mortgages to add to the income stream. If you are one of the few fortunate enough to have a lifetime pension, you’ll find advice on choices about when to retire and take the pension, spousal coverage and comparing rollover alternatives.

You can listen to my podcast with Steve Vernon at www.FriendsTalkMoney.org.

Don’t ignore your future retirement finances — or, even worse, fall into the hands of a financial salesperson more concerned about commissions than your financial security. Instead, take the time now to read and understand this short, simple retirement financial planning guide. It will help you create the best retirement asset: financial peace of mind. And that’s the Savage Truth.