Controlling the Cash: Smartly Planning and Managing Retirement Income

CFP Board Consumer Advocate Offers Advice for Generating and Living on Investment Income in Retirement

While the average American would relish the prospect of complete control over their cash flow, most retirees living off their savings would say such responsibility is more overwhelming and nerve-racking than empowering.

And as millions of baby boomers begin retiring without the pensions of yesterday, it is important that all Americans make plans for generating and managing sufficient income in retirement so that they don’t outlive their savings.

Certified Financial Planner Board of Standards (“CFP Board”) Consumer Advocate Eleanor Blayney, CFP® tackles this challenge in the latest installment of CFP Board’s “Let’s Talk Planning” blog and its “Financial Planning is for Everyone” series, with the first in a four-part series on retirement income planning.

“Generating retirement income is comparable to that of a NASA engineer trying to land a spaceship on Pluto,” says Blayney. “Everything may be optimized and perfectly calculated to give the highest probability of success, but without mid-course corrections along the way, the likelihood of achieving the goal – of landing the ship or generating enough income to live on during retirement – is very low.”

Throughout the series, Blayney poses the tough questions retirees and pre-retirees alike should be asking themselves, and provides helpful advice on the three key areas of retirement income planning: spending plans; investment allocation and security selection within the retirement portfolio; and making tax-smart withdrawals from portfolio accounts.

• Spending Plans:  It’s not just what you save – but the amount you spend, and the types of those expenses – that will determine whether you will have enough to live on in retirement. 
• Investment Allocation and Portfolio Planning: Just because you need income in retirement does not mean it’s time to load up on fixed income or high-yield securities.  A sizeable allocation to growth assets is as important as ever.
• Tax-Smart Withdrawals: Now that you can withdraw from both pre-tax and after-tax accounts without early distribution penalties, where should you go first to draw the money you need for retirement? 

“The reality is that generating retirement income requires ongoing decision-making over the life of the retiree and there is no one solution or product that will be good for the duration,” says Blayney. “Maintaining an on-going relationship with a CFP® professional who can provide advice on needed adjustments over the course of retired life is as close to a ‘one stop, sleep soundly’ solution as it gets.” 

ABOUT LET’S TALK PLANNING

“Let’s Talk Planning” is a blog by CFP Board Consumer Advocate Eleanor Blayney, CFP®, with posts each week with practical financial planning tips for consumers, as well as insights into the latest developments at CFP Board.  In addition to offering counsel on timely and evergreen financial planning topics, once a month Blayney will remind readers that “financial planning is for everyone,” with tips for consumers of all ages and life stages.