Understanding the financial issues can help give you greater confidence...

Understanding the financial issues can help give you greater confidence when it's time to retire. Credit: Dreamstime/TNS

By triple-checking your finances, you can hit retirement ready to roll and with the confidence to enjoy that time, secure in the knowledge that you won’t outlive your income.

By working through the following areas yourself or with the right financial adviser, you can prepare with confidence.

Social Security choices

Specialized software can help you optimize your Social Security strategy.

“You can use an analytical software package like Social Security Analyzer or maximizemysocialsecurity.com that can calculate the maximum lifetime Social Security income for you and your spouse and at what age to claim your benefits to achieve those maximum projected benefits,” says Vincent Birardi, CFP, wealth adviser at Halbert Hargrove.

Retirement budget

Social Security is one pillar of income sustainability, but the program wasn’t created to fully fund retirement. You’ll need other sources of income.

Getting enough income doesn’t begin with earned money, however. It starts with understanding your potential expenses.

“Set a budget long before you set a retirement date,” says Michael Arvay, founder and CEO of Marvelous Retirement Planners in Toledo, Ohio. “Five years prior to retirement you should have a very good idea of where and what you want your retirement to look like, financially.”

From there you can begin to build the income toward your needs. Tax-advantaged retirement plans such as a 401(k) or IRA help you amass wealth, but you’ll need to turn that into income.

“It is important to ensure that all assets in an investor’s portfolio are producing income,” says Russell Hackmann, CFA, and president with Hackmann Wealth Partners in Stamford, Connecticut. “Money market funds, CDs and T-bills can provide 5% or more returns on cash currently. Dividend-paying stocks can generate both current income and the long-term growth of the stock market.”

Annuities can also provide sustainable lifetime income, says Hackmann, though he acknowledges their mixed reputation.

“The best lifetime income annuities offer solid guarantees of lifetime income, reasonable costs and legacy value for beneficiaries,” he says.

Your tax situation

Understand the tax effects of various actions.

For example, if you’ve contributed to pretax accounts such as a traditional 401(k) or traditional IRA, you’ll generate taxable income when that money comes out of your account. In contrast, with after-tax accounts such as a Roth IRA and Roth 401(k), money comes out tax-free.

Prepare mentally

Understanding the financial issues can give you greater confidence when it’s time to retire.

“Too many retirees have their fingers crossed, hoping their money will last their lifetime. Hope is not a plan,” said Kris Whipple of Kristopher Curtis Financial in Nashville.

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