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Piershale: Plan income before you retire

You ideally spent your professional years saving and storing up money to fund properly your retirement years. Even so, once the long-awaited retirement date arrives, you won’t have a regular paycheck anymore.

You may question how much money you’ll need in retirement and where you can get the income. Normally, you take income from your assets, such as social security or a 401k plan, earmarked for retirement.

The key is to time your new income to begin precisely when your paycheck stops, allowing for a seamless, happy trail into retirementland.

But this area is where some people get caught off-guard. They don’t know where to begin or how to start taking income from their assets.

You might be tempted to wait until after you retire to set up your income, but this might cause your income to be delayed while you’re designing it. It does take time to set this up. Now, imagine having that conversation with your spouse.

A star tip: Put your income in place before you retire.

You more than likely will be coordinating multiple sources for income. At minimum, you’ll have a 401k plan, IRA, pension and then social security. You also might have some after-tax accounts in the mix.

Not only do you need to coordinate the income from all these sources, but you also have to decide how much income you need.

Be careful here.

If you take too much income, you could run out of money later during retirement.

A retirement cash flow analysis (RCFA) can help this situation. The analysis can help give you an idea of the amount of income you can take during retirement. A RCFA takes into account your different sources of retirement income.

It can incorporate retirement accounts and cash flows, such as 401ks, profit-sharing plans, pensions and social security.

It also factors inflation, interest and taxes. It’s a powerful tool that projects your income over your actuarial life expectancy.

A part of this projection includes a social security analysis to help you know your best options to maximize social security benefits whether you’re single, married, divorced or a widow(er).

Once you know how much income you need, it’s just a matter of setting your accounts up for withdrawals.

If you have pre-tax and after-tax accounts, you might want to balance your income between them, depending on your circumstances.

Lastly, don’t forget our favorite charity – the IRS. You may want to set up federal withholding for taxes on the income from your retirement accounts.

• Mike Piershale, ChFC, is president of Piershale Financial Group. Send any financial questions you wish to have answered in this column to Piershale Financial Group Inc., 407 Congress Parkway, Crystal Lake, IL 60014. Fax them to 815-455-6895 or email mike.piershale@piershalefinancial.com.

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