Retirement: It’s an Income Story

Where is your main focus for retirement?  Is it returns?  Is it income?  If your retirement goal was not to run out of money and produce an acceptable income, would you deem it successful if you accomplished that without getting a return you thought was good or appropriate?  I had the privilege to hear Robert Merton (Recipient of the Alfred Nobel Prize in Economic Sciences in 1997) at a recent conference, and he verified in my mind what our focus should be for retirement.  He said, IT’S AN INCOME STORY.

At Claris, we always start with a plan of defining what the purpose is for this money.  If the purpose for the money we are analyzing and investing is for retirement, then we usually start with helping define their income goal.  When we are in our earning years, we usually focus on the income we are making.  This allows us to live our lives with the standard of living we want for our families.  But, when planning for retirement we usually make a shift to put more focus on the return our wealth is earning instead of the income our wealth needs to provide.  I’m not saying we shouldn’t be monitoring and paying attention to the return and growth of your investments, but it should work in concert with your overall income goal.

So, don’t confuse this with other goals you might have where the goal is to achieve a certain amount of money (college for kids, a vacation house, etc.).  At Claris, we believe retirement planning should be focused on the INCOME needs of our clients to maintain their desired standard of living in retirement.  That income may come from a variety of sources (pensions, social security and investments).  But, when you wrap it all up the focus is on that desired stream of income being produced, just like it was during your earning years.  Because at the end of the day, isn’t that how we really are going to define retirement success?

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