Tips for balancing income during retirement!

by Frank Jersey

Published on this site: February 11th, 2004

During our working years, each of us became accustom to managing our expenses according to our income. In planning for retirement, you should look at the various income sources that will be available to you and layout those income streams on a spreadsheet so that you will be able to see exactly when income will become available for your use.

Your spreadsheet may contain income from social security, annuities, pensions, stock dividends, mutual fund gains, mutual fund dividends, bonds, certificate of deposits (CD's), money market funds, interest bearing checking or savings accounts, 401k's, business investments and possibly other income sources.

In laying out income, keep in mind the frequencies in which the income becomes available to you. Also, consider that sources such as interest payments or bond payments can change based on the number of days in a month or when the end of a month occurs.

Also, many institutions only make December distributions on the first business day in January of the following year. This means your December distributions scheduled for other than the end of month might be larger than a typical month. The Institutions do this so that they can close out the tax year for you and only have to run their computer systems once.

Mutual Fund distributions may require planning if you are not used to them. Some Mutual Funds make dividend and gain distributions every quarter, some only make these distributions once a year. There is no guarantee here either. So it would be wise to have a backup plan in place for Mutual Fund gain and dividend income withdrawals should the institution determine that a distribution is not going to occur during any one period. Remember to instruct the Mutual Fund Institution to distribute income to you and not reinvest it. The institutions usually default to reinvest when you initially set up an account.

Another consideration in receiving income can be mail time should you be receiving your distribution via mail. During peak mail periods, delivery can be delayed by days and in remote areas, up to a week or more. To avoid mail delays, consider having all income and distributions deposited directly into your checking account. Just about every financial institution has the ability to make direct wire transfers into your account. However, if you choose this method of obtaining income, make sure you regularly verify the income amounts.

Once you have all of your income sources laid out in a spreadsheet, project the income for an entire year. Remember to pay attention to each income source schedule and only project the income according to the schedule you know you can rely upon. Take a look at each and every month and determine whether the projected income for that month will be sufficient for your needs. If the income flow looks fine, you should be all set. If the income flow looks like it will fall short during certain periods during the year, look at the possibility of changing any of the income source dates to be in line with your income needs. Since different bonds and stock dividends are paid at different times, look to purchase comparable investments with payment dates that best fit your schedule.

If your income projections for the year don't look like they will be sufficient to meet your income needs, consider taking a part time job, utilizing principal from the poorer performing assets or look at non-conventional income possibilities in sources such as reverse mortgages.

Some people are disciplined savers and will have no problem dealing with the highs and lows of income flow. But if you are not one of these people, it will be best to get your income flow into a fairly predictable even range that you can depend upon.

Mr. Jersey has worked in the financial services industry for over 30 years. Visit his website at www.someonesgottadoit.com for more information about Retirement Issues and Opportunities.