Most of us focus on the financial aspects of retirement and have traditionally relied on three primary sources. Often called the “three-legged stool,” these sources are comprised of Social Security, employer-sponsored plans, and personal savings.

Most estimates of retirement needs are 70% to 90% of pre-retirement life. For the average retiree, Social Security will cover about 40% of pre-retirement income. It makes sense to maximize this benefit. Many planners believe that delaying benefits until age 70 is the best way to get the most from Social Security.

Most estimates of retirement needs are 70% to 90% of pre-retirement life. For the average retiree, Social Security will cover about 40% of pre-retirement income. It makes sense to maximize this benefit. Many planners believe that delaying benefits until age 70 is the best way to get the most from Social Security.

As retirement time nears, it is necessary to assess your financial situation to get an accurate idea of how much money you will spend in retirement. Life-style questions will need to be answered: How will your time be spent? Will you remain in your current home, downsize, or move to a new area? Will you travel or mostly stay close to home? Once those questions are answered, you will know if there is a gap between your expected income and proposed expenses.

There are several sources of income that can help bridge this gap. One is the growing trend for people to continue working, perhaps on a part-time basis. This adds funds to your budget and provides a way to stay socially engaged while bringing structure to your days. If this is your plan, be sure to keep your job skills current so that you are marketable.

Another source of retirement income can be a reverse mortgage. Your home is used to provide a stream of income which can be in the form of a monthly check, a lump-sum payment, or a line of credit to be used for extraordinary expenses. Home equity loans might also be a source of income to provide liquidity for unexpected expenses. Be sure to consult a professional advisor before entering into these arrangements.

Health Savings Accounts are a relatively new tool that can be used for retirement planning. Contributions to the HSA are pre-tax and grow tax free. Distributions are also tax free when used for medical expenses. Medical expenses can be reimbursed, even if they occurred in prior years, as long as those expenses were not reimbursed by any other source or taken as a deduction on a prior tax return. If you can afford to pay your medical expenses out of pocket, the HSA can grow and be used to reimburse expenses in future years when you need extra cash.

With these additional sources of retirement income, we move from the “stool” concept onto a “ladder” of solutions. Other sources of income that may be on your ladder include rental property, inheritances, long-term care insurance, or social programs such as Supplemental Security Income, and Medicaid.

Contact the professionals at Mierendorf and Co., P.C. for assistance in planning for your retirement.

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