Increase retirement cash flow if your nest egg is too small to outlive you.
Manage your cash flow to prevent outliving your assets. Conduct a retirement cash flow analysis before you retire and recalculate every year to ensure your financial future. A cash flow analysis provides baseline figures of the funds available for retirement before and during your retirement years. Jane Bryant Quinn, author of an AARP column and personal finance expert, recommends that you spend no more than 4 percent of your retirement funds each year -- and that's if you have stock, not just fixed-income investments. If your monthly needs exceed your cash available, you can live on less or find an additional source of income to create a higher retirement cash flow.
Instructions
1. Determine available income. Calculate your Social Security retirement benefits with the calculator on the Social Security website. Estimate your investment and interest income and your income from employment. You can create retirement cash flow by waiting to take your Social Security until full retirement age or as late as age 70. Taking retirement at age 62 reduces the Social Security monthly payment by 25 to 30 percent and reduces the years you can add to your retirement fund.
2. Assess your cash flow needs and create a retirement budget. Calculate how much money you need for the year and divide by 12 for your monthly expenses. Calculations by the year include items such as insurance and taxes paid once a year -- items you might forget if you calculate cash flow needs by the month. Anticipate that your Social Security retirement check has Medicare Part B and Part D costs deducted before you receive it.
3. Compare the monthly funds available to your monthly expenses to determine if you have enough income to meet your cash flow requirements. Expect to pay income taxes on Social Security if your combined income is greater than $25,000 as a single filer or $32,000 if you file a joint federal income tax return. Combined income is the total of your adjusted gross income from your tax return plus nontaxable interest and half of your annual Social Security income.
4. Find sources of additional income but do not assume additional risk with your money if you are of retirement age. You need government-backed bonds, certificates of deposit and other safe investments. Find income from seasonal or part-time employment or start your own business. You can sell items at the local flea market in good weather to add to your cash flow.
5. Sell some tangible assets. Choose assets to sell that will reduce your expenses, such as extra vehicles that you continue to insure. You may have collectibles and accumulations that you no longer enjoy. Add this income to your cash flow for the year. Downsize to a smaller home and save on taxes, upkeep, insurance and utilities. Create your retirement cash flow with a combination of analysis and activities that work for you.
Tags: cash flow, Social Security, your cash, your cash flow, retirement cash flow, your retirement
