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Mailbag- Matching Assets with Income Needs

Mailbag- Matching Assets with Income Needs

| February 21, 2022

Welcome back mailbag readers… had a few month hiatus during year end.  As always, the below are real questions from real clients and/or loyal readers with the names changed to protect the innocent.  Here we go with the first for 2022 with the question from Mr. & Mrs. Charleson from Perry, MI.

Hi Ed.  We are in our mid-60s and getting close to retirement, we think.  We have about $1M in our IRAs and 401ks, plus a small pension from Mr. Charelson's old job as truck driver plus social security for both of us.  What do we need to do as we get close to retiring?

 Thank you for your question.  Below are some quick keys followed by sketch of the deeper planning required.

  1. What is your monthly need for income?  In other words, how much does it cost the two of you to live each month?  That means you need to review your spending patterns.
  2. What large annual or semi-annual needs do you have?  Examples would be property taxes, Christmas spending, insurance bills, etc.
  3. Are there new additional annual amounts we need?  An example would be $5,000/year for travel.  Think through this.
  4. What are the guaranteed amounts of income expected and when?  Examples are social security and pensions.  Some may have the proceeds from the sale of business we need to address.

After these first four data points are unpacked, we will get into a process of matching your investments (assets) with expenses (liabilities).  The general process is to create a strategy with different buckets of assets with different levels of risk based on the time delay before you need the assets.  In other words, each of you will know and feel comfortable as every dollar has a purpose.  That's an income strategy!

Loyal readers, please submit your questions to where real life meets real people and we give real advice.

Financial Guidance For Purposeful Life Journeys

Investments in securities do not offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested. No system or financial planning strategy can guarantee future results.