Income layering in retirement

Income layering in retirement is used to describe someone’s various sources of income in retirement. Most clients I see usually have more than one source or one layer of income. These layers of income can also change over time. It might start out for example when you are preparing for retirement, you might go from 5 days a week work to 2 days per week, this is your first layer, then you might top up the missed income with a regular fortnightly income stream from your superannuation which is your second layer. Then when you retire, the income sources might change again, you might still continue a fortnightly income stream from your superannuation, add in a layer of the Centrelink pension plus also maybe a small layer of income from an annuity.

Even when I deal with self-funded retirees, the layers still can change overtime in retirement and aren’t often linear. You might start off with some income from your superannuation and rental income from investment properties. Then as your superannuation gets used, you run out of income flexibility for the bigger purchases or holidays which is when it might be time to sell an investment property which stops a source of income but then the proceeds can be used to generate another source of income.

It’s always good to map out how your income is layered in retirement and also how these sources might change overtime to ultimately meet your individual living expenses needs and “larger purchase” needs during retirement.