Planning for Retirement Income: The Tale of Two Retirements

I see it every day, the tale of two retirements. It’s not about the haves and the have nots when it comes to planning for retirement income success. It is about those who properly plan and those who do not plan. That is the tale of two retirements.

Benjamin Franklin must have been referring to planning for retirement income when he said “if you fail to plan, you are planning to fail.” Looks like we can add “Retirement Income Planner” to the long list of Ben Franklin’s achievements.

It is a simple concept regardless of how much you have saved for retirement. Having a retirement income plan will increase your chances of retirement success. On the other hand, not having a plan will almost certainly lead to disaster. Just think about all the variables you’ll have to take into account. Variables such as longevity, health, and of course outliving your money.

Finding the retirement you love starts with a retirement income plan. Taking the first step may seem daunting but we can help. Patriot Advisory Group offers a worksheet to help you begin to construct your retirement income plan. It is a simple yet proven tool that will help you visualize the various levels of a retirement income plan. The worksheet will help you list and prioritize your retirement needs and give you a high-level view of a plan.

Check off the Basics: A Guide to Planning for Essential Expenses in Retirement. Once you complete the worksheet this guide jumps into the specifics of retirement income needs in a bit more detail. The purpose of taking this first step in planning for your retirement income is to get you thinking in the right direction.

Before you take on the worksheet, let me provide some guidance on what to expect as you begin planning for retirement income. These initial three steps are critical items that go into a retirement income plan.  Most importantly, the three steps will help increase your chance of living comfortably and confidently in retirement.

How to Begin Planning for Retirement Income

There are three initial steps to planning for retirement income. They are:

  • Step 1 = Determine Your Three Levels of Retirement Expenses
  • Step 2 = Plan for Retirement Income Longevity
  • Step 3 = Analyze Retirement Income Sources

Let’s dive in!

Step 1 = Determine Your Three Levels of Retirement Expenses

Planning for Retirement Income Step 1

NEEDS, WANTS, and WISHES. Start by documenting a retirement income plan. The Income Hierarchy Worksheet is a simple way to start. The worksheet is designed to help you organize your thoughts as you develop your retirement income plan.

Consider such vital questions as:

  • How will you spend your money?
  • How will you prioritize your expenses?
  • How will you fund them?

When thoughts are organized and written down, you can likely collaborate more productively with a professional as you work to develop a successful retirement income plan.

The Income Hierarchy Worksheet is the classic financial planning pyramid that covers everything from the things you’ll need to survive to the things you just want to do for fun. It seems like an easy concept but you’ll be amazed by how much this simple worksheet gets your imagination running.

Here’s how the pyramid is broken down:

Start at the base or foundation of the pyramid

Nothing succeeds without a strong foundation, correct? In retirement income planning that includes the items you need to survive! These essential expenses are what we refer to as “M.U.G.”

M.U.G. is an acronym for mortgage, utilities, and groceries. Customer research shows that explaining this acronym gets people thinking about their own essential monthly expenses which may include more than these three items.

What would fill your essential M.U.G items?

These essential expenses represent the base of the financial pyramid that must be addressed before you can start to be optimistic about achieving more during retirement. You need to “own your base” and in order to achieve that these M.U.G expenses have to be covered with protected lifetime income, income streams that are not vulnerable to market ups and downs.

Planning for Retirement Income MUG

Three examples of protected lifetime income streams are:

  1. Social Security
  2. Pensions
  3. Annuities

Differentiate between retirement needs, wants, and wishes

In order to determine if you have covered M.U.G, you first need to differentiate between retirement needs, wants, and wishes. It’s common when I work with couples on retirement plans their first objective is to “travel”, that’s when I have to tell them to slow down a bit as we have to first cover essential items.

Once these expenditures are separated, determine how much is needed each month to cover essential needs. Then calculate expected monthly income from social security, pensions, and any annuities. If these protected income streams cover essential expenses, that’s great. If you fall below, that’s a security gap. Usually, the security gap is already being accounted for with probable income.

Probably Income

Part of probable income usually comes from conservative investments like bonds or CD’s. This probable income is conservative but it is not protected income. When they built the pyramids in Egypt, and the Pharaoh asked if the foundation would hold up in tough times, the answer was not, “I hope so”. To clarify,  your base and M.U.G expenses have to be able to survive any market conditions, good times but especially bad times. That’s why it’s important to have your M.U.G items covered by guaranteed protected income tools.

As you move up the pyramid, wants for a comfortable lifestyle appear. After that, then comes wishes for a very good lifestyle. If your plan is secure and you feel your needs will be covered, there is a much better chance that you will feel optimistic about keeping some of your savings in moderate or aggressive investment to achieve your wishes.

What we’re really trying to accomplish is to cover essential expenses in our retirement income plan with some sort of protected income. As you get higher in the pyramid and reach the wants and needs, other forms of income will come into play. Previous generations were largely satisfied with just meeting their needs in retirement, people approaching or in retirement today are demanding more, considering things like travel and visiting family as retirement non-negotiables. So having said that, once you identify your needs, wants and wishes you’ll need to develop a retirement income plan to get as high as possible in your retirement pyramid.

Optimize your chances of reaching the top of the pyramid

Using protected lifetime income and probable income will optimize your chances of reaching the top of your pyramid. Patriot Advisory Group is the architect of entire retirement pyramids, we specialize in protected lifetime income as well as investment advice to cover both protected and probable income in retirement. 

Let’s move on to Step 2 of Planning for Retirement Income.

Download our Income Hierarchy Worksheet to help you develop your retirement income plan.

Step 2 = Planning for Retirement Income Longevity

This is a singular task but the most important task while planning for retirement income. Construct your retirement plan as if you’re preparing for the long haul, a marathon if you will. 

Many years ago when I climbed mountains, during each trip my main goal was not to reach the summit but to return back to basecamp safely! When climbing mountains, most “accidents” occur on the descent. Everyone has a plan on getting to the top but some fail to return safely. 

I use that analogy all the time with my clients. Don’t have a disastrous accident when you’re “descending” in your financial life cycle. You’ve worked hard to get to the financial planning summit, now it’s time to make it back safely. Equally, don’t have a financial disaster when you’ve already retired as you will not be able to recover as you did while working. If you plan for a 15-year retirement but you or your spouse lives 25-30 years in retirement? How will you fill your NEEDS and WANTS?

We're living longer than ever!

The numbers are there, we’re living longer in retirement than ever. Another part of planning for longevity is also planning to comfortably live through a major medical event such as having to reside in a nursing home. The point being, don’t run out of money because you have underestimated your longevity or a major medical event has occurred. 

  • 50% of women who reach 65 will live to age 85, with 31% living to age 90
  •  80% of pre-retirees are “somewhat anxious” that their savings my not provide enough to live through retirement 
  • 80% of pre-retirees do not have a specific plan in place

Some solutions to think about as you’re thinking through your plan is to have tools that protect your longevity. A combination of protected income streams with proper investments in your probable income stream. Hedged with longevity planning tools, also known as long-term care protection. Just like training to run a marathon, you want to prepare as early as possible for the marathon that may be retirement. 

Last up is step 3.

Step 3 = retirement Income Sources

Multiple Sources of Retirement Income

Now that we’ve discussed the items you need to put in your Retirement Income Hierarchy (Pyramid) and the importance of planning for longevity let’s take an inventory of what resources you may have available. When constructing a retirement income plan, Patriot Advisory Group begins with your needs, wants and wishes then we work on how we’re going to fill each level of your planning pyramid. It’s a holistic approach that begins with what you want out of retirement.  

Here are the four most common assets that will be available in the retirement income planning phase.  Every plan is unique and your assets may differ, let’s review these below:

Social Security

This is the concrete you’re going to use for the foundation of your retirement spending pyramid we discussed above. This will begin to fill your NEEDS with a guaranteed lifetime income stream for you,  your spouse and any dependents.   

Social Security is a guaranteed income stream for retirement for those who have earned the required credits. There are strategies to help optimize when and how to start this retirement benefit. There are also tax considerations when taking your social security benefit as up to 85% of your benefit can be taxed.

Social Security Trained Professional

Social security benefits require a Social Security trained professional to help optimize what and how you receive your retirement funds. The Social Security Administration does not provide guidance on Social Security Planning. Patriot Advisory Group provides Social Security planning for all clients. All PAG advisors are National Social Security Certified Advisors. Client’s who work with a financial professional receive over 17% more in Social Security benefits than those who do not. 

Social Security is not only a benefit for your retirement income but those of loved ones as well:

  • Divorced spouse benefits
  • Survivor spouse benefits
  • Disability
  • Dependent children benefits


If you have a pension involved in planning for retirement income, you’ll need to know how that pension may affect your social security benefits. In addition, consider how that pension issuer will hold up to perform their obligations to you.

Market Investments

Market investments include savings as well as qualified retirement plans such as 401K’s, 403B’s etc. Particularly qualified retirement plans, these plans are excellent for accumulation as they grow over a long period of time and can withstand market fluctuations for the most part. Mostly likely you’re getting a match from an employer and taking advantage of dollar cost averaging. These plans are a tool for the accumulation phase however as you enter the distribution phase different tools will be needed. 

Once again I’ll use my mountain climbing analogy: what is worked during the ascent up the mountain will not work during the descent down the mountain. Why is that? A 401K can still grow while I’m retired? Yes it can but you have to take into account sequence of returns risk. Simply put, the sequence of returns states, as you’re in the accumulation phase you can withstand market fluctuations (corrections) because you have time to recoup and you’re still contributing. However, in the distribution phase ONE bad year in the market can derail your retirement income plan. 

So I guess It’s all about luck and timing? Nope! It should never be about luck and timing when it comes to running out of money in retirement. There’s ways to plan and minimize or even eliminate sequence of return risk in retirement. 

Retirement Income Sequence of Returns Risk


There’s tons of information out there on annuities. Also, there are so many different kinds. Variable, fixed, fixed index, etc. You have to find which one fits your unique needs. Annuities are a valuable tool and have their place when planning for retirement. 

Social Security benefits are pretty much an annuity. Annuities are built for the NEEDS and WANTS section of your planning pyramid. They check off most of the boxes we need for that foundation. 

Patriot Advisory Group analyzes each client’s unique needs, if an annuity makes sense we’ll include it in the plan if it doesn’t that’s fine as well. 

planning for retirement income next steps

Check off the Basics: A Guide to Planning for Essential Expenses in Retirement. Once you complete the worksheet this guide jumps into the specifics of retirement income needs in a bit more detail. The purpose of taking this first step in planning for your retirement income is to get you thinking in the right direction.

To sum up, you should now have enough information to begin to construct your retirement planning pyramid. In addition, to ascend and descend that retirement income planning mountain. Begin with listing the items in your pyramid on Patriot Advisory Group’s Spending Hierarchy worksheet and keep in mind you’re planning for the long haul. Once you establish that, do an inventory of your assets.

As I always tell our clients, think of Patriot Advisory Group as your Sherpa in this expedition, putting it all on the line to make sure you get back to basecamp safely. Feel free to contact us. We’ll be your Sherpa!

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