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One popular retirement planning method is the flooring approach.
But it doesnt leave much room for any extras.
This means having enough to cover basic living expenses.
Creating a floor in ones income can be as simple as starting to [understand] your non-discretionary expenses.
Once you understand your non-discretionary expenses, you might identify the monthly income your floor requires.
it’s possible for you to create a stable financial floor in several ways.
However, your income streams should be ones unaffected by changes in the market.
They should also have a steady payout, so you always know how much youre bringing in.
Here are the four steps youll need to take to create a stable financial floor.
Determine Your Basic Needs
Start by figuring out your basic needs.
Remember, the flooring method wont cover every expense youll ever have in retirement.
But it is designed to eliminate financial uncertainty in your retirement planning.
Say you need $3,000 a month to feel financially stable in retirement.
This means your initial goal should be $1,500.
If you need more or less, it’s possible for you to adjust your goal accordingly.
Establish Those Income Streams
Knowing how much you need is only half the battle.
Once youve got your calculations, its time to establishsome steady income streams.
Social Security, pensions or annuities with guaranteed lifetime income all qualify for flooring,' said Orsolino.
As Ryan pointed out, other income streams could include investment account distributions or dividends.
Find out which income streams work best for you, and start saving and investing.
Or it could mean contributing as much as possible to an annuity.
Weigh your options and get started as soon as it’s possible for you to to build that stability.
Take Things Further
You dont have to limit yourself to the essentials.
Once youve established your financial floor, you could find other ways to increase your income.
In the worst case, dips in the market will only impact your non-essential spending like travel.
Youll still have the basic floor you better cover your retirement.
On the other hand, it can be limiting or even lead to a boring retirement lifestyle.
Keep in mind that you dont have to stick with this method alone.
you’re free to, as Orsolino said, combine it with other retirement planning strategies.
Is the Flooring Method Right for You?
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