Retirement Cash Flow Planning for Women

Your total income inflow can come from Social Security, pensions, annuities, retirement and other investments, and miscellaneous income like real estate or even part-time work.

We think of cash outflow — your expenses — as either essential or discretionary. Essential expenses are housing, food, transportation, insurance, taxes and basic household bills. Discretionary can run the gamut, but would include entertainment, travel, gift giving and recreation.

Your total cash flow is your total income minus your total expenses.

It’s important to explore your current financial situation and create a baseline for yourself and your family. You’ll need a net-worth statement, which will include your assets, debt and cash reserves; and a monthly or annual itemized projected budget. The more details you account for, the more precise your estimate will be.

Do your research. Talk with friends or family members who have retired. Continue reading. Knowledge is power. Did you know:

• You can assume higher health care costs than you saw as an employed person²
• You can only expect Medicare to cover about two-thirds of the cost of health care services during retirement³
• You may require expensive home renovations in order to age in place
• You must plan to pay taxes on withdrawals from retirement accounts
• You may need to financially support family members in the future
• You’re likely to need a replacement car in your future

Will you be able to cover these expenses?

Another important consideration: Can your retirement handle inflation? Inflation is the rate of increase in prices over a given period of time. As prices continue to rise in the U.S., the impact of inflation on managing cash flow after retirement must be factored into your future planning.

One tip from United Bank Senior Fiduciary Wealth Advisor, Jane T. Sargent, Certified Trust Fiduciary Advisor, Senior Vice President, is "if you work, it's vital to contribute the maximum allowable into your 401k plan."

You may have heard that the rule of thumb is to plan to spend 75% to 80% of your working income in retirement. But it turns out that higher-income, higher-saving households may need 60% or less when factoring in their pre-retirement income, savings rates and reduced taxes. And for the same reasons, lower-earning, lower-saving households may need closer to 90%.⁴

Says Sargent, “The most tragic issue I see is lack of estate planning. This has impacted several of my clients. They thought their spouse had everything in order in the event of death, but unfortunately that was not the case. Many people think they don’t have enough of an estate to have a proper estate plan developed, but everyone should have a Will, Power of Attorney documents, both financial and medical, at the very least.”