Your Retirement Income Projection Part 1: Income Analysis

Getting Started on Your Comprehensive Written Retirement Income Plan: Income Analysis

This article is part one of a three-part series in which we’ll dig deeper into the first aspect of preparing your comprehensive written retirement income plan: the retirement income projection. This series is based on content that originally appeared in our book, Momma’s Secret Recipe for Retirement Success, and you can grab your copy here.

We’ve shared before how important it is to have a comprehensive written retirement income plan, and today we’re delving into the details of getting started. Step one in the four-part process is to do a Retirement Income Projection, which consists of three aspects:

  1. Income analysis
  2. Risk analysis
  3. Fee analysis

In this article, we’ll walk you through the income analysis step.

Why This is Important

When you retire, there are a lot of things to be anxious about. You’ll be staying home and no longer be doing something every day you have been doing for 20, 30, 40, even 50 years. If you’re like most retirees, the part about retirement you are most worried about is how will you create income every month for as long as you live that will allow you to pay for everything you need and want. You want to know and be able to see where your income is going to come from for the rest of your life. If you can’t actually see where your income is going to come from, and if you can’t be sure that you will receive it for as long as you live, the worries, pressure, tension, anxiety, and fear will always be there haunting you.

When you were working, it was easy. Monday through Friday (and maybe some weekends) you woke up, took your shower, had your coffee, drove to work, had some more coffee, put in your hours, drove home, did it again, and like magic, your accounting department sent you a paycheck every week, two weeks, or month. Now you are retired, and the accounting department no longer knows who you are; they definitely are not going to be sending you any more paychecks. Now you have to be your own accounting department and create your own paychecks from your assets for the rest of your life.


SEE ALSO: Answer These Three Questions to Know What You Really Want Out of Retirement


Hypothetical Example

We’ll use Bob and Carol as our hypothetical example scenario of how this income analysis works in real life. They are both 65, have been retired for two years, receive $24,000 of pension income and $54,000 of joint Social Security Income, totaling $78,000 per year, which is $6,500 of gross income per month. Their current net after-tax monthly income was $5,800. Their monthly expenses, not including travel, were $5,700. They had just enough each month to pay for all of their needs, but no extra income for travel, emergencies, extra costs, or the future.

Bob and Carol had $1,600,000 in assets, and like many other retirees, they weren’t using their assets for income. The assets were just sitting there, assets they had saved for the single reason of using for income in the future when they retired. Bob and Carol stated their broker told them it was better for them to defer income distributions into the future—until they were age 70 1⁄2. We told Bob and Carol their future is right now, it’s not a year from now, it’s not a couple years from now, and it’s definitely not at age 70 1⁄2 when they will be forced to take required minimum distributions from their accounts. Their future is right now because they want and need more income, and they are young enough and healthy enough to travel all over the place!

Here’s what their current income plan looked like before they arrived:

  • Carol’s $24,000 pension
  • Carol’s $26,000 Social Security
  • Bob’s $28,000 Social Security

This totaled $78,000 per year of gross annual income. They also had $1,600,000 of assets producing no income.

After meeting with Bob and Carol several times and determining what they wanted their money to do for them, a new income plan was created:

  • Carol’s $24,000 pension
  • Carol’s $26,000 Social Security
  • Bob’s $28,000 Social Security
  • $60,000 of additional annual income

The plan increased their total annual gross income to $138,000.

They took $500,000 of their $1,600,000 and placed these funds into a bucket we called “Carol IRA Bucket #3 Growth With 10% Stop-Loss” and then used this bucket to provide Bob and Carol $60,000 of income distributions for five years. After five years, income distributions from Bucket #3 would be reduced.

Bob and Carol loved the idea of increasing their annual income from $78,000 to $138,000, but as they thought about it, they became apprehensive about how much income tax they would have to pay by increasing their income so much because this meant they would be taking out $60,000 of taxable IRA distributions. Their broker had always warned them they would get hit hard with income taxes if they tapped into their IRA assets before age 70 1⁄2 but their broker was not 100% accurate. When Bob and Carol’s broker, or your broker, says it’s better to defer your IRA assets until age 70 1⁄2, it may simply be better for the broker, not for Bob and Carol!


SEE ALSO: What Type of Retiree Are You?


They then placed $400,000 of their $1,600,000 assets into a bucket we called “Carol IRA Bucket #1 Guaranteed Lifetime Income.” Carol deferred taking income from this account for five years. By deferring, after five years Carol is contractually guaranteed to receive $28,119 of income for life, for as long as she lives, even if she lives to 120! If Carol passes away, her $28,119 of annual income will be paid to Bob for as long as he lives, even if he lives to 120. If Carol and Bob both pass away, 100% of the remaining funds in this account are paid to their named beneficiaries. Carol’s $28,119 of income will never be affected by stock market volatility or losses.

They then placed $400,000 of their $1,600,000 assets into a bucket we called “Bob IRA Bucket #1 Guaranteed Lifetime Income.” Bob was also planning to defer taking income from this account for five years. By deferring, after five years, Bob also is contractually guaranteed to receive $28,119 of income for life, for as long as he lives. If Bob passes away, his $28,119 of annual income will be paid to Carol for as long as she lives. If Bob and Carol pass away, 100% of the remaining funds in this account are paid to their named beneficiaries. Bob’s $28,119 of income will never be affected by stock market volatility or losses.

By allocating $800,000 of their $1,600,000 of retirement assets into Bucket #1, Bob and Carol are guaranteed to receive annual joint lifetime income of $56,238 for as long as they live, and all funds remaining in their account when they both have passed away will be paid to their beneficiaries. Their joint $56,238 of income will never be affected by stock market volatility or losses. Isn’t that what most retirees really want? To have the highest amount of income paid for as long as they live, the income not affected by stock market losses, and anything they don’t use is paid to their beneficiaries?

That’s precisely what we believe most retirees want.

They then placed $100,000 of their $1,600,000 assets into a bucket we called “Bucket #2 Liquid Safe Bank Funds.” Bob and Carol are not using this bucket for income. These funds can be used for any purpose in the future such as to buy a new car, complete home remodel, help grandkids with college, or anything else they need a large lump sum of money for. They also might never spend this money at all, and just use it to feel safer throughout retirement.

Finally, they placed $200,000 of their $1,600,000 assets into a bucket we called “Self-Managed Stock Assets.” Bob and Carol are not using this bucket for income. These stock funds are planned to be held long-term and, just like the money in the bank, can be used for any purpose in the future.

Can You See the Substantial Benefits of a Retirement Income Analysis?

Bob and Carol loved their income plan because they could “see” how their income was going to be paid to them every year for as long as they lived. They were going to have $60,000 more in gross income starting immediately, and they were going to receive $56,238 of joint guaranteed annual income after five years that would be paid to them for as long as they live.

If you have assets sitting there not creating your retirement income, you could benefit from this process. If you’ve been putting it off, there’s no time like the present. Give us a call today to get the conversation started.

In the next installment of this series, we’ll continue the retirement income projection process with step two: risk analysis. Need more content in the meantime? Check out our blog and radio show!

This information is provided and intended to be used for general educational and informational purposes only and is not intended as a solicitation for you to buy or sell any financial product. This information is not mean to be relied upon as actual financial or tax advice. The ideas, thoughts, and strategies presented here are those of the Management Team and provide an insight to our views at Peak Financial Freedom Group, LLC and its affiliates. None of this information is intended to give you specific tax, investment, real estate, legal, estate, or financial advice. The planning and ideas in this data are not suitable for all individuals or situations. Consult a qualified financial professional before making any investment decision.

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All of the information presented here is provided and intended to be used for general educational and informational purposes only and is not intended as a solicitation for you to buy or sell any financial product. None of the information presented is intended to give you specific tax, investment, real estate, legal, estate, or financial advice but rather to serve as an educational platform to deliver information. The ideas, thoughts, and strategies presented here are those of the Management Team and provide an insight to our views on Peak Financial Freedom Group, LLC. Every detail in this website is subject to change without notice. Seminar, radio shows, TV productions, book releases, magazine and book promotions are sponsored, promoted and paid for by Peak Financial Freedom Group, LLC.


2nd Opinion Package available to Qualified Retirees and Soon-To-Be-Retirees may include free consultations, a free retirement income plan, risk analysis, and fee analysis. In addition, a comprehensive written retirement income plan may be provided to those who complete the entire process. Qualified Retirees and Soon-To-Be Retirees must have a minimum of $1,000,000 of investible assets such as IRA’s, 401K’s from past employers, stocks, bonds, mutual funds, bank accounts, money markets, CD’s, etc., but DOES NOT include real estate, businesses, limited partnerships, 401K/retirement plans that can’t be moved to another plan, and other illiquid type assets.


All investments involve risk, can involve the loss of principal, and unless otherwise stated, are not guaranteed. Past performance is no indication of future performance and such information cannot be relied upon regarding future potential gains. Nothing is directly or indirectly guaranteed by this information. The planning and ideas presented herein are not suitable for all individuals or situations. Hypothetical examples are used to explain concepts and are not indicative of potential results you could receive; past performance is not a guarantee of future results; and results are not indicative of any particular investment or income tax situation; your results will be different and could be lower or higher. Consult your financial professional before making any investment decision. Insurance product features and benefits, such as guaranteed lifetime income riders, are subject to contract terms, limitations, fees, and the claims paying ability of the insurance company issuing the contract. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund the purchase of any other asset including an annuity may have tax consequences, early withdrawal penalties, or other costs and penalties as a result of the sale or liquidation. Different assets can be complex and carry fees, costs, and surrender charges. If you place assets under management with Fiduciary Solutions
LLC, we are paid an advisory fee from Fiduciary Solutions LLC and if you purchase an annuity through us, we are paid commissions from an insurance company.


2019(1), 2020(2), 2021(3), and 2022(4) Five Star Professional Wealth Manager Award - Dan Ahmad and Jim Files have been nominated for and have won the 2019, 2020, 2021, and 2022 Five Star Wealth Manager Awards. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Once awarded, wealth managers may purchase additional profile ad space or promotional products. Award does not evaluate the quality of services provided to clients. The Five Star award is not indicative of the wealth manager’s future performance. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Award winners represent an exclusive group of wealth managers who have demonstrated excellence in their field by satisfying 10 objective selection criteria. For additional information on the Five Star award, including a complete list of the 10 objective selection criteria and their research/selection methodology, go to https://fivestarprofessional.com.


Investment advisory services are offered through Fiduciary Solutions, LLC, a California Registered Investment Advisor. Insurance products and services are offered through PFFG Insurance Agency LLC, a licensed insurance agency (CA Insurance License #0N14013). Peak Financial Freedom Group LLC is a financial planning and umbrella marketing organization, which enables the provision of multiple financial services under one brand. Peak Financial Freedom Group LLC, PFFG Insurance Agency LLC, and Fiduciary Solutions LLC are affiliated entities with common ownership and control.


Jim Files is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD #1620449) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0F06511). Dan Ahmad is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1491561) and is a licensed insurance producer with PFFG Insurance Agency LLC (CA Insurance License #0732913).

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