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Your Retirement Paycheck

Transitioning into retirement isn’t what many commercials make it out to be. While we’re often presented with images of relaxation and vacation homes, for many of us those large swathes of empty time can be more stressful than that 9-5 commute ever was.

One way to recreate some of the stability you had in your long career is to give yourself a paycheck. This is a habit you’ve come to know and love for the past 30-40 years, and while you’re technically paying yourself, it’s something that can bring new retirees a sense of calm.


So if you’re ready to start paying yourself (and ready to ensure that nest egg you’ve worked so hard for survives) here are a few things you need to know.


1. How much do you need?

Once you retire your lifestyle is bound to change. Gone are the days of long commutes, season work wardrobe shopping sprees, and your $5 cup of coffee three times a day. But you also may find yourself hitting the links a little more frequently, or racking up some air miles on vacation. Now that you’re retired, you need to determine what your basic costs of living will be, along with your new hobby/entertainment costs. Determine this value in both a weekly and monthly figure to see just how things are going to break down.


2. The role of fixed payments.

Now that you’ve determined your cost of living, let’s say $10,000, you’re going to want to subtract your fixed payments from that value. Fixed payments will include your Social Security and your pension if you happen to have one. These sources of income are great because they already align with the pay style most of us are used to. If these combined values are $3,000, you know going forward each month you’ll need to contribute $7,000 from your savings into your checking account.


TRY THIS: With retirement there are a lot of unknowns. I recommend your first year developing a budget and keeping a close eye on your accounts. You’ll want to make note any time you need to withdraw more from your savings for big expenses. Then at the end of the year, you’ll want to note if you’ve got a surplus sitting in your checking account. This will indicate if you really need $10,000 a month, or if moving forward you can shave that number down.


3. Three different portfolio strategies to make this happen.

  1. Income approach - this type of portfolio is earning enough dividends and interest from your investments such as bonds or mutual funds to recreate your pay structure.
  2. Total return approach - for this approach you’re going to remain fully vested. You decide how much you want to keep out of the stock market, how much you want in bonds, and each month you pull out of that investment account what you know you need. This method benefits from market rise, but also can cause you to sell at inopportune moments in order to ensure your retirement paycheck arrives.
  3. Bucket strategy - this strategy involves keeping enough in cash out of your investments in order to pay yourself. With two to three years in cash reserve you’re able to watch the markets play out and sell when the timing is right for you. However, if unexpected expenses occur, you could find yourself having to tighten your belt to get through until your next large cash installment.

So, as you can see there are multiple ways to make your paycheck happen. All it takes is some planning, and the right advisor. If you’re interested in developing your own retirement paycheck, feel free to contact us today at Heller Wealth Management. 

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Larry Heller, Not Your Average Advisor.

 

A CFP® (Certified Financial Planner) and a former CPA.

Has helped solve complex financial planning for 20+ yrs.

Member of Wealth Management Think Tank.

A financial advisor think tank that meets monthly to discuss investment strategies and planning opportunities.

Larry is approached regularly by the respected journals.

“Journal of Financial Planning”, and “The Wall Street Journal”.