Broker Check

Retirement Income

At Brennan Financial Services, we have been helping guide our clients through retirement for over three decades. This ongoing experience gives us both the hindsight and the knowledge to shape plans moving forward. While every retirement is unique, we know that our most confident retirees are those that plan well for it.

Today’s retirement is vastly different from when we began. Gone are the days of Dad working a corporate or government job for forty years, retiring at 65, and living off of a great pension with Mom until they hit a life expectancy of 75. Medical science is making sure we live longer, technology is changing the job market daily, and the financial resources used to retire are no longer what they used to be.

When I became a financial advisor over 15 years ago, pensions were more common, Social Security was more secure, and interest rates at the bank were 4-5%. The traditional three-legged stool of retirement was still prevalent: retirees relied on pensions, Social Security, and their own savings, in that order. We had not had the Great Recession, and investors (and advisors) generally felt that an 8% annual return over a long market cycle was feasible. Therefore, a 5% withdrawal rate was sustainable.

These days, people are still working for forty years but now may be retired as long as thirty years, and for the most part they no longer have the security of a pension to support them. The reason that companies are moving out of the pension business is that they know what we know: it is more unpredictable and therefore more expensive to protect a steady income for thirty years than it is for ten years. Today’s retiree must rely more on their own good stewardship than ever before.

And yet, today’s retiree has not been taught how to do this. The financial industry assumes that retirees understand retirement income plans, but in reality they need a deep education on how to use their resources in retirement.  Retirement success comes in all shapes and sizes, and retirement failure comes in all shapes and sizes. According to the Natixis 2016 Individual Investor Survey Whitepaper, most people think they need 65% income replacement in retirement. However, the actual number is closer to 75-80% income substitute.

This boils down to the one question that we resolve for every client approaching retirement:

“Do I have enough income to support my expenses?”

This simple inquiry is the foundation of every financial plan, at every stage of life, for every individual, no matter the level of wealth. In actuality, it is a two-step inquiry.

First, you must determine what you want your retirement to look like, in order to figure out what your annual expenses will be. You should ask yourself as many questions as you can about what will make you happy in retirement: where you want to live, do you want to travel, do you want to have your house paid off, do you have family members that will need your help, do you have health conditions that will alter how you spend your time and money, etc. There are no two retirement plans that look the same, nor should there be. This is your opportunity to identify what is important to you, and to make sure you can fund it over your lifetime.

Second, you must evaluate and total your sources of income and other resources. Whether each source is static, guaranteed, speculative, consistent vs. one-time etc. Again, this will be unique to you. If you are fortunate enough to have a very dependable income, you may not need to save as much as your neighbor who owns a small business. However, she might be able to sell her small business for a healthy one-time lump sum that you will never be able to experience in your lifetime. You might expect to inherit a small sum of money at some point, while she will have passive income from a real estate portfolio that she built over her working life.

Let’s take a look at the various sources of income that can be used in retirement.

Social Security

The challenges to the Social Security system are well-documented in the news, and will continue as long as retirees age and as long as our lawmakers ignore the fact that changes need to be made.  Nonetheless, we plan for our retirees over the age of sixty to receive the Social Security benefit listed on their statements. While Social Security can have a cost of living adjustment (COLA), we don’t count on it when we build retirement plans. There are many variables in arriving at the correct decision about when to take your Social Security, and this should be a main focus for any retiree, as it builds a foundation of steady income. The most common factors to determine how to maximize your benefit are your age, whether you are still working, your other sources of income, and whether you want to use any of your current assets to “bridge the gap” until you take Social Security. The Social Security website has great tools, including access to your personal Social Security statement and benefits calculators, available here:


Pensions have been on a long slow decline for decades, but they still exist for some corporate retirees, and for government employees including teachers, administrators, and service people in fire and police departments and the military. Each pension plan is unique to the employer, and will offer an income based on your years of service, age, income, and the structure of the plan. Some plans offer a lump sum option, where you receive a sum of money for you to manage, as opposed to a steady stream of income. The decision about which option is best for you depends on your needs and goals, and should be reviewed with a professional who can explain the pros and cons of each choice to you.

Personal Savings and Investments

The personal savings category used to be the smallest of the three, or at least the one with the least responsibility for the success of your plan. These days, most of the clients I work with depend on their own investments and assets for at least half of their retirement income.

Let’s look at an example couple with two working spouses, neither of which had a pension. According to the Social Security Administration, the average monthly Social Security payment for retired workers in 2016 was $1,341. If both spouses are higher than average income earners, we will assume that each will have a monthly $2,000 benefit, totalling $48,000 per year. If the couple would like to have $100,000 in total retirement income and has no other pensions, the couple will have a gap of $52,000 ($100,000 - $24,000 - $24,000).

If we plan for the couple to take a 4% annual withdrawal rate from their portfolio, they would need $1,300,000 invested to retire and have the lifestyle they want in retirement ($1,300,000 @ 4% = $52,000). With this knowledge, they can allocate their resources now to build their investments so they can confidently walk into retirement.

This “back of the napkin” calculation is a much more simplified version of what a true retirement plan should look like. Our plans include an analysis of expenses - and how likely they are to escalate, resources - and how dependable they are over 30 years, a Social Security strategy, pension options, family dynamics, how prepared you are to handle changes in health, and the risks that may derail even the most thoroughly researched and prepared retirement plan.

We want all retirees to be confident as they walk into retirement. If you want to learn more about our process and how we can help you prepare for retirement, contact us at

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. As individual situations vary, the information presented here should only be relied upon when coordinated with individual professional advice.

Have a Question?

Thank you!