Congratulations! By the time you start this phase, you’ll have made it very far. Not only have you completed the Foundation Phase, but you’ve been investing for some time in the Accumulating Wealth Phase! Pat yourself on the back. You’ve stuck with it, and now you’re about to reap the rewards of all your hard work.
The Strategic Income Phase could also be referred to as the Retirement Phase, since you will now be able to quit your job if that’s what you want to do. But before you quit your job, it’s a good idea to calculate if you’re able to retire comfortably and have enough income to last the rest of your life.
If you’re not comfortable doing these things on your own, you might benefit from a professional second opinion or working on an ongoing basis with a Certified Financial Planner™ to determine if you are truly ready for the Strategic Income Phase.
What is the Strategic Income Phase? It’s the phase where you can start spending your retirement assets, preserving some retirement assets through ongoing management, preparing your final financial plan, and teaching your children and grandchildren about money management.
There are many questions that arise in this phase. Should you draw earnings from the stock market or should you leave it alone? Should you simply rely on Social Security or bolster it with rental property income? Will you have enough to retire? All of these questions can be answered by a Certified Financial Planner™ if you’re having trouble answering them.
Again, it’s very important to understand the risks in retirement before you retire. People are living very long lives nowadays, and you’ll need all those living years financially covered. You’ll also need to understand how inflation works, know proper withdrawal rates from your investments, how to establish a Strategic Reserve Account, and consider long-term care insurance to protect your income just like disability insurance protected your income during the first two phases.
As you’re well aware, with age comes more medical bills, and many times the children have moved out of the house. Life changes, and so do your financial needs.
The Strategic Income Phase, like the Accumulating Wealth Phase, also involves needs analysis, which can be conducted by a Certified Financial Planner™ who helps clients manage their retirement. Needs analysis in this phase involves forecasting financial needs and financial positions throughout retirement so that you can live comfortably – and even thrive – throughout the rest of your years.
Every year, it’s a good idea to make spending adjustments based on your needs and the status of your income sources. You’ll need to maximize pension and do Social Security analysis so that you can know what to expect.
Finally, you’ll need to stress test your financial plan for different scenarios. What would happen to your income from the stock market took a dive? What would happen if a tenant moved out of your rental and you couldn’t find a new one for a year? Could you still stand on your financial feet?
A good Certified Financial Planner™ can help you answer these questions and more if you’re having trouble. And again, congratulations on reaching this phase!
For more information on how you should be giving during the Strategic Income Phase, check out the Three Phases of Giving!
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