Life is about choices - having them and deciding which ones work best for you. Retirees, for example, often feel that they must choose from a few possible alternatives for converting their retirement assets into income:
- Withdraw earnings and interest only, as needed
- Withdraw earnings and interest, as well as principal, as needed
- Enrol in systematic withdrawal income programs (SWIPs) or guaranteed withdrawal benefit plans (GWBs)
- Take lifetime income (annuitize or set up a personalized pension)
Which one is best? A better question is this: why do you have to choose only one? Consider that retirement, or whatever you want to call the “R” word, may be the longest set of phases in your lifetime. Collectively, it they can comprise 30-40 years or more of your life. You can define or redefine who you are, what you want to do, how you want to do it and how long you want to do those things. Yes, sometimes circumstances, health, relationships and the markets will influence or dictate a change in direction or a re-ordering of your priorities. That may well trigger changes in how you convert your assets to provide sustainable income.
That brings us back to the question: why do you have to choose one of the four alternatives for converting your assets into income? Can one alternative work for decades?
Today's reality is that combinations may work best.
For one person it may be 1 and 2. For another person it could be 2 and 4. For a third person it could be 1 and 3 for the first 10 years or so and then switch to 3 and 4. Combinations provide diversification and may help to spread out and reduce risk. Combinations also provide flexibility, which is important because each one of you has a unique list of needs, wants and circumstances. These may change, so your plans, strategies and solutions may also need to change to adapt to new realities.
Don’t live in a world dictated by absolutes. Explore how you may be able to build flexibility and options into your plans, strategies and solutions. Speak with an advisor who is well versed and trained in retirement income planning about building structures with flexibility so you can live out your dreams, satisfy your wants and have peace of mind.
