In recent years, interest rates have languished near record lows. Many retired investors who depend on investment interest alone to cover their day-to-day living expenses have faced unexpected shortfalls. They are faced with the significant challenge of funding both short-term liabilities and longer-term retirement goals on an ongoing and sustainable basis.

Individuals in retirement face the same problem that the managers of large pensions face: how to match available funding to current and future expenses. In the pension world, this is known as “liability-driven investing,” or LDI. For individuals investors, this approach is comparable to personal budgeting, with the caveat that – unlike earning a salary – funding levels and sources can vary over time.

For individuals planning or approaching retirement, the sooner funding levels and sources are closely considered, the better. Here are four steps investors can follow in their effort to organize anticipated funding with anticipated spending in retirement:

  1. Start by assessing all fixed sources of monthly revenue, such as a pension, rental income, Social Security, or wages from part-time employment.
  2. Compare the projected monthly income with anticipated monthly expenses.
  3. Calculate the additional monthly funding required from savings that is necessary in order to cover any budget shortfall.
  4. Consider the potential effects of inflation and taxes in consultation with a financial advisor or tax planner.
You are a pension fund
The term “retirement income” – broadly defined as the amount of money an individual earns after retirement – is a misnomer. This is because it inaccurately describes the financial provisions upon which post-career livelihoods are based. After transitioning to retirement, it is less accurate to describe individuals as income recipients than as the designated payees of various funding sources. These funding sources can include savings, investments, Social Security and pensions.

Retirement planning requires investors and their advisors to forecast a multi-sourced income stream over an extended period of time. In addition to undertaking an honest appraisal of which expenses are necessary and which expenses are secondary, it is important that wild cards involving health, family, or happenstance also be considered. After all, there is no such thing as retirement income – individuals must instead rely on the careful execution and organization of their retirement funding.

Natixis Global Asset Management is committed to helping investors live better financial lives. Read our Latest Insights page to stay up to date on market trends and investor sentiment.


This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.

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