An oft-neglected way to ensure you have more income than you’ll actually need in retirement is to plan out the specific ways you will fund both your short-term needs and your short-, medium-, and long-term goals. In other words, every retiree should have an income schedule.
Now, everyone’s situation is different, which is why your investments should be coordinated with your specific requirements for income, growth, protection of principal, and liquidity. However, here are some general guidelines:
Short-Term Needs: These are essentially your monthly living expenses. With careful planning, many retirees find they can often meet these needs through their Social Security alone, supplemented with careful withdrawals from their savings and, if necessary, distributions from their retirement accounts.
Short-Term Goals: These could be fixing the roof on your house, attending your relative’s destination wedding in the Caribbean, or making a major — but not life altering — purchase. (For example, a retired client of mine has devoted much of his now ample free time to mastering the art of pottery and decided to purchase a very expensive, very high-end kiln. This is obviously not the same as buying a car or moving to a new home, but it was also something he didn’t want to just stick on his credit card.) These types of goals can often be met through the use of short-term investments like money market funds, CDs, and Treasury bills.
Intermediate Goals: When you need income for something that’s between 2 and 10 years away, it can often be funded through fixed-income investments like municipal and government bonds.
Long-Term Goals: For longer-term income needs, goals that are far off on the horizon, or just to combat inflation, many retirees turn to long-term investments like stocks, mutual funds and exchange-traded funds, and even real estate.
