Build a Plan so Work Is Optional

April 8, 2021

Retiring does not happen overnight. When you are thinking about retirement, chances are that you can’t just book a one-way ticket to paradise that departs tomorrow. You might remain dependent on your income, there will be costs associated with retiring, and people still depend on you, whether it’s at work or at home. In order to retire, the first step is to make work optional.

Making work optional means ending reliance on income from working. Depending on your timeframe, this may be a gradual process but the strategy is to establish multiple streams of income. Here are some things to think about as you get started:

What Lifestyle Do You Want?

How do you picture your retirement? Will you move to your dream city? How often can you vacation? What are your living expenses? Most importantly, is it sustainable? Protecting your income stream is important in retirement as you want to make sure you can survive any unexpected events such as a market downturn or health problem.

After you have a plan, the next step is to execute. Soon, you will be able to live the life you have worked so hard for. As long as you prepare for the changes to your life, you should not be worried. With continuous monitoring, any changes can be adjusted for. Beach House Wealth Management specializes helping those who are beginning their steps into retirement. Our planners would be happy to help you make work optional.

Plan Your Income

A careful evaluation of your retirement accounts alongside your life expectancy will show you how much your new income will be, and where it will come from. Remember, a large drag on your retirement funds will be taxes. The income tax rate you fall under can be reduced if you also use funds from both taxable and non-taxable accounts in your retirement. The key here is to create multiple streams of income among different accounts.

Distributions from tax-deferred accounts such as a 401(k), IRA, or 403(b) will count as taxable income, whereas tax-exempt accounts such as a Roth 401(k), or Roth IRA grow tax-free and is also tax-free as you take distributions. In addition, dividends and interest from an income-producing brokerage account, real estate, and passive income from business ownership are other great sources of retirement income. Analyzing the balances of all your accounts can tell you the right distribution mix to minimize taxes and maximize your work-free income.

Remember, Social Security is a significant source of retirement income for many. Determine how much you qualify for.

Set A Target Date

This is very important. Without a time-specific goal, there is no telling when you will actually retire. Your entire plan, which will include everything you need to take care of to call your transition successful, centers around this. Even if your plan moves slower than expected, you will have an idea of when it will be finished with.

When you set a target date, you can know which loose ends to tie up at work, finish projects you have been working on, and anything else that needs to be closed out before you depart.