When assessing their retirement income planning strategy, most people want to maintain their current standard of living after they retire. That’s why they are saving and investing; to support their future spending. But rather than focusing on how much wealth to accumulate, you should think about how much income your portfolio can support.

Asking how much retirement income your portfolio can support can lead to better retirement planning and change how you invest. This income-focused approach allows you to manage risks such as interest rates, inflation and stock market downturns. During your working years you mostly invest in global stocks and bonds. The closer you get to retirement, your focus shifts from income growth to income risk management as you reduce exposure to equities and invest more in bonds and inflation protected securities.

This video will show you how this approach works and gives numbers in a scenario that demonstrates what this strategy can do for your retirement income planning.

The Most Effective Retirement Income Planning

Dimensional Fund Advisors and Cogent Strategic Wealth believe that this investment approach for reducing the uncertainty around future income results in more effective retirement planning and a greater chance of maintaining your standard of living after you retire.

We asked a similar question in our post about when to start taking social security benefits. We shifted the focus from “How do we get the most out of Social Security?” to “How do we get Social Security when we need it the most?” It’s best to plan for your specific situation and not what is generally considered “the best time” or “getting the most.”

Reaching your financial goals requires your investments and finances to be aligned with your goals, and then protecting your assets in a way that allows you to survive anything. Educating investors is what we love to do as a team at Cogent Strategic Wealth.