From Yahoo Finance: 2025-06-29 07:02:00

When it comes to retirement planning, everyone has a different approach. Some prefer safe investments, while others take risks for potential higher returns. One popular method is the “flooring” approach, focusing on steady monthly payments for essentials. Experts discuss how to implement this method and its pros and cons.

To create a stable financial floor for retirement, start by determining your basic needs like housing, groceries, and healthcare. Next, set short- and long-term financial goals to reach that stable floor. Identify steady income streams like Social Security or annuities. Consider investing in a 401(k) or IRA for stability.

Once you have your financial floor in place, you can explore additional income opportunities like investing in stocks or other assets. This provides flexibility for non-essential spending like travel, while ensuring your basic needs are covered. The flooring method offers peace of mind with guaranteed income but also involves risks like market volatility.

Establishing a financial floor in retirement is crucial for stability and peace of mind. By carefully planning and diversifying income streams, you can ensure a comfortable retirement with the flexibility to enjoy non-essential expenses. Consider the flooring method as a strategic approach to securing your financial future. “Flooring” is a retirement strategy that works best when combined with other strategies like systematic withdrawal and bucketing. It can lead to an optimal retirement plan, but may also result in a limited or “boring” lifestyle. This method involves creating a consistent income floor, which some may view as giving up flexibility or potential gains.

It’s important to note that you can mix and match different retirement planning strategies to suit your needs. The decision to use the “flooring” approach depends on your attitude towards money and the type of income and assets you have. Those accustomed to consistent cash flow may find this method more appealing than those who rely on savings or other assets.

Ultimately, the success of the “flooring” strategy hinges on your financial psychology and your sources of income. Combining it with other methods can help create a stable financial foundation for retirement. Remember that everyone’s situation is unique, so it’s crucial to tailor your retirement plan to fit your individual needs and preferences.

Read more: 4 Steps To Create a Stable Financial ‘Floor’ in Retirement