We’re going to deal with the question, “When can I take income from my assets?” Believe it or not, many retirees sort of hesitate at this question. A lot of this has to do with mindset, which we’ve talked about in previous videos; it also may have to do with methodology.

An Income-Last Mindset

When it comes to mindset, retirees become accustomed to detaching themselves from their retirement savings. It’s an account and a number of buckets that they saved into for so long and not needed that when it comes to retirement income, our tendency is to actually not use these to their fullest extent, but to continue to preserve and save them for a later day.

Conventional Advice Misses the Mark

It may perhaps have to do with methodology. We’ve talked about how an investments-only or probability-based methodology can put some confusion in the minds of retirees on how much they can enjoy from their assets. When it comes to this probability-based methodology, there are built-in assumptions and analysis that happens in order to produce a retirement probability. All of this is analytical and mathematical, and for the everyday retiree, it doesn’t quite give them the clarity that they really need to confidently answer the question, “How much can I enjoy?” It’s a modeled, computerized analysis that can sometimes prove more unhelpful than helpful for today’s retiree. So, mindset and methodology can get in the way of answering this question, “When can I take income from my retirement assets? When can I begin to enjoy my retirement assets?”

A New Approach to Building Retirement Income

Let’s first talk about the 4Buckets framework, because it’s good to continue to remind ourselves of what the 4Buckets is and what it does. The 4Buckets is an integrated solution for retirement income, meaning it combines the best of both worlds, the best of insurance guarantees, the best of investment outcomes, and long-term investment growth to produce a retirement income strategy that you can feel really good about and have clarity on.

The 4Buckets Process

So, this 4Buckets framework moves from buckets 1, 2, 3, and 4 to build out a retirement income strategy that’s first and foremost based on income that you can count on, that’s secure, and that lasts for the rest of your lifetime. Then, any additional assets that remain in your financial plan can be invested for growth. This bucket of assets is directly tied to your lifestyle and your needs in retirement, and this bucket of assets can be positioned for long-term investment growth. It’s clarifying, it’s peaceful, and it’s helpful for today’s retiree.

Income-First Mindset Means Income Now

So, once we’ve adopted the 4Buckets framework and once we stepped into a new mindset – That savings and assets that you’ve accumulated are now going to be used intentionally for your everyday retirement income – we should be excited to answer that question, “When can I take or when can I start enjoying the income that I’ve saved?” Once you’ve walked through the 4Buckets framework, there’s very little reason to delay beginning to enjoy your retirement savings.

If you think about it, perhaps you have built out this 4Buckets lifetime income, you’re likely incorporating some type of insurance-backed guarantee on your income. It’s in your favor to begin this income sooner rather than later. We often get the question from retirees, “Well, you know I’ve got this plan in place but I prefer to hold off from starting the income from my plan.” That’s simply a scarcity bias that we have to continue to push against and fight against in retirement knowing that we have a solid plan in place. We’re utilizing third parties for the guarantees that they can provide us, and so we want to use them to the fullest extent. Go ahead and enjoy that income.

Social Security Timing is Easier Than You Think

Now, there are going to be some elements of your financial plan that may start sooner rather than later when it comes to retirement income. We love talking about Social Security and when to start the Social Security engine. Well, there are going to be some nuances to that question mostly around the sort of work you would like to do in a semi-retirement period. There are some dings or penalties in place if we start retirement income from Social Security early and continue to work, so we do want to think through some of those nuances on a case-by-case basis, but in most circumstances we’re going to build a retirement income strategy looking at all of the options on the table. Particularly for Social Security, we’re going to look at every age. We’re not going to simply start at your full retirement age and plan around that. As you know, you can turn Social Security on at age 62. So, we want to see all those income options and feel really good about whatever path we do end up taking.

The Optimization Myth

Remember, Social Security optimization is more of a myth than we want to admit, right? Because at the end of the day, optimizing Social Security ultimately depends on how long you have enjoyed it. Meaning, from when he turned the income on to when he passed away, that’s going to tell us whether you made the most optimal decision or not.

Setting Out with Confidence

So, rather than getting tied up in the timing of income, Social Security, and the rest of your 4Buckets lifetime income that you’ve built, it’s good to first have a plan that you feel great about. Then, once that’s in place, stepping forward in confidence, starting that retirement income engine and feeling really good about what you have in place. Let’s first adopt our new ‘retirement income-first’ mindset, let’s build out a framework that is aligned with our preferences and behaviors as humans and investors, and once we have that solid plan in place, go ahead and enjoy your retirement income.