How to Create Multiple Sources of Retirement Income

Like so many employers have already done, pharmaceutical giant AstraZeneca Pharmaceuticals LP announced in February 2022 that it will pull the plug on its $1.3 billion pension plan later in the year.

​Although the company closed the plan to new hires in 2000, and has frozen benefit accruals since 2017, the plan closure will still affect nearly 7,000 current workers and retirees.

The news underscores the importance of not relying on a single employer pension, but of having a diversified financial strategy for saving and investing for the future.

That's where a good financial planner can be crucial. We can help you with these important tasks:

• Defining your retirement income and other financial goals,
• Assessing your current situation,
• Defining your risk tolerance, and
• Identifying strategies to meet your goals.

 
Financial strategies
Whether or not you expect to receive a traditional pension, you should also develop alternative sources of retirement income. Here are some financial strategies to consider:

1. Protect yourself against disaster.  Don't take risks where you and your family can't afford to lose. Shore up your financial foundation with adequate life, disability, long-term care and homeowner's/liability insurance.

2. Maximize your 401(k) match. At a minimum, you should contribute enough to pick up every dime your employer will match within your 401(k) plan. Many plans still match 50 cents to a dollar for every dollar you contribute, up to 3% of your income. Take advantage.

3. Reduce your debt. Some debt, like mortgage debt or some business debt, helps you build your net worth over time. But most consumer debt, such as credit card debt, charges high interest and eats away at your ability to save for the future. Try to eliminate this kind of debt, so you can maximize retirement contributions.

4. Maximize IRA contributions. You can put in up to $6,500 by way of traditional and Roth IRA contributions, depending on your income. Twice that if you're married. Those over 50 can contribute another $1,000 per year.

You may be able to deduct some or all of your traditional IRA contributions, depending on your income. But regardless of income, you can still make non-deductible contributions to traditional IRAs. Every little bit helps.
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5. Delay Social Security benefits until age 70. Unless you're in poor health, try to delay taking Social Security until you are 70.

Benefits increase by 8% per year for every year you can delay. Delaying may also help you sidestep taxes on Social Security benefits. That may mean staying in the workforce longer, or creating a 'bridge' income between retirement and age 70.

6. Consider annuities for guaranteed lifetime income. If you don't have a guaranteed pension income, a guaranteed lifetime income annuity can accomplish the same thing.
 
Don't put off retirement planning. The longer you delay making these important decisions, the more difficult it may become to accomplish your retirement goals.