On The Agenda:
Let’s talk about 5 income gaps in retirement. There are probably more gaps than you realize. On this episode of How Money Works, we’ll explain what they are and why you need to know about them.
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Episode Show Notes:
On today’s episode of How Money Works, Jennifer Moser shares five income gaps and why you need to know about them.
Paycheck gap
So you stopped working and no longer get a paycheck. Now, where are you going to get your income?
“You’ve got to ask yourself, how are you going to use your investments to fill this income gap? Are you just going to wing it? Some people do. Sometimes it’s successful, and sometimes it’s not,” said Jennifer Moser.
Some people get to age 80 and realize they made a mistake by winging it. Some use the 4% rule and only draw down 4% of their investments, but you’ve got to be prepared for flexibility in your portfolio.
Social Security gap
If you didn’t do enough financial planning, you might think your need to turn your Social Security on as soon as possible to fill that income gap. But Social Security was never designed to cover 100% of your lifestyle in retirement. Never was. Never will.
For higher wage earners, it covers even less of their lifestyle because Social Security is capped.
Inflation gap
The cost of things goes up over time, about 3% every year. Inflation is the true multiplier of the sins of our lack of planning. It can be hard to wrap your mind around it, but it’s important figures to keep in mind.
Listen to the full episode to hear about more income gaps, including long-term care and widow’s gaps, or use the timestamps below to jump to a specific segment. Thanks for listening!
Important Points:
0:24 – Paycheck gap
2:55 – Social Security gap
7:08 – Inflation gap
11:52 – Long-term care gap
16:26 – Widow’s gap
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