How to Create Retirement Income That’s Driven by Cash Flow – Kiplinger’s Personal Finance

As the U.S. economy teeters on the brink of a recession, you may be wondering how you can create a retirement income portfolio that will stand the test of time. Like many other pre-retirees or retirees, you were probably spooked by the stock market in 2022.

If your retirement income strategy involves yearly withdrawals from your investment portfolio to fund your lifestyle, a stock market decline like this one can negatively impact you. That’s because withdrawals on top of market declines can permanently impair your nest egg. That could mean reducing your lifestyle to avoid running out of money.

One way around this dilemma is to build a portfolio that creates a consistent source of reliable cash flow while allowing for capital appreciation potential. This strategy, coupled with a retirement plan based on a realistic assessment of retirement spending and optimized Social Security claiming, lays a foundation for success.

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This article will discuss how an income-driven approach to retirement planning works as well as the benefits of employing it in your retirement income portfolio.

Establishing a Realistic Retirement Income Plan

To create a realistic retirement income plan, there are specific steps that place cash flow at the center of your retirement planning process, while avoiding chasing performance. These three steps are:

  • Estimating your specific income needs based on your anticipated retirement lifestyle. This budget—or spending plan—should include non-discretionary and discretionary expenses. You’ll also want to cover other contingencies that arise in retirement, such as inflation, taxes and rising medical costs in later retirement.
  • Optimizing Social Security and other sources of income involves determining what sources of income you’ll have as well as the best timing and sequence to activate those sources of income.
  • Filling the income gap is then very simple. You subtract your anticipated income from the anticipated expenses to obtain that number. While there are many ways to generate this income, one includes an approach based on multiple dividend strategies and structured notes, which will be explained in the example below.

How Cash-Flow-Driven Retirement Planning Works

Let’s say that you’re preparing to retire. You’ve …….


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