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fsgmichigan.com 9 CHAPTER 1 THE NUMBERS AND PSYCHOLOGY OF RETIREMENT The income produced by your portfolio is considered variable income because it is not fixed and guaranteed. With variable income, you need to operate with a margin of error in case something goes wrong. By applying a growth rate to your current portfolio (with contributions factored in), you can project a portfolio balance at retirement. Using a 4% starting withdrawal rate, you can then determine the sustainable income production amount for the portfolio. This is obviously an oversimplification of the process, but it gives you an idea of the factors that help determine your retirement income and, when done properly, can boost your confidence in your plan. The looming prospect of retirement can be a source of significant anxiety for many. Will I have enough money saved? What will I do with all my time? These questions, among others, can cause sleepless nights and unnecessary stress. However, with proper planning, much of this pre-retirement anxiety can be alleviated. By creating a comprehensive retirement plan, individuals can gain a more clear understanding of their financial needs and resources. This involves estimating future expenses, evaluating potential income sources like pensions and social security, and developing an investment strategy to ensure financial security. By knowing they have a solid financial foundation, retirees can feel more confident and secure about their future. Moreover, planning how to spend time in retirement is equally important. Retirement should be a time of joy and fulfillment, not boredom or aimlessness. By exploring hobbies, interests, and potential volunteer opportunities in advance, individuals can transition smoothly into this new phase of life. They can cultivate a sense of purpose and meaning, which is essential for well-being and mental health. Whether it's traveling, taking classes, starting a new business, or simply spending more time with loved ones, having a plan for how to fill your time can significantly reduce anxiety and create a more positive outlook on retirement.