PLANNING Your Retirement Income
Is Your Retirement Income Plan at Risk?
Retirement income planning, more so than retirement planning (See "Frequently Asked Questions" for a discussion of the difference between the two) is fraught with risks. Any one of these risks, let alone in combination, can sabotage a retirement income plan if not properly addressed in the planning stage.
Some retirement income planning risks can be mitigated, others cannot. In addition, there are to main types of risks as follows:
- Risks Common to All Retirement Planning
- Risks Specific to Retirement Asset Planning
Robert Klein has written extensively about these risks in his weekly blog, Retirement Income VisionsTM. References to the various risks will be to specific weekly posts.
Risks Common to All Retirement Planning
There are six risks that are common to all retirement planning as follows:
- Income Tax
- Social Security Benefits Reduction
Please refer to the September 14, 2009 post, Is Your Retirement Plan at Risk? for a discussion of these six risks.
Risks Specific to Retirement Asset Planning
In addition to the six risks that are common to all retirement planning, there are three risks that are specific to retirement asset planning. They are as follows:
- Withdrawal Drag
- The Sequence of Returns
- Safe Withdrawal Rate
These three risks are discussed in the following three posts, respectively:
- Withdrawal Drag - The Silent Killer (September 28, 2009)
- The Sequence of Returns - The Roulette Wheel of Retirement (October 5, 2009)
- Safe Withdrawal Rate - A Nice Rule of Thumb (October 12, 2009)
All of the foregoing financial risks contribute to the inherent uncertainty associated with the retirement asset planning process during the withdrawal phase of retirement. Even if you've done an excellent job of accumulating what appears to be sufficient assets for retirement, you generally won't know if this is the case for many years unless you have done retirement income planning.