<p>-
- The Flooring Approach: 4 Steps To Create a Stable Financial 'Floor' in Retirement</p>
<p>Angela MaeJune 29, 2025 at 6:02 AM</p>
<p>wavebreakmedia / Shutterstock.com</p>
<p>Everyone has a different approach to retirement planning, which makes sense considering one person's needs and goals are going to be different from another's. Some prefer to play it safe, while others are willing to take more risks in pursuit of flexibility and potentially greater returns.</p>
<p>Find Out: I Asked ChatGPT How Much Money I'll Need To Retire in 5 Years: Here's What It Said</p>
<p>Try This: How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too</p>
<p>One popular retirement planning method is the "flooring" approach. This method prioritizes building financial security through steady, predictable monthly payments that cover just the essentials — like housing, groceries and healthcare. But it doesn't leave much room for any extras.</p>
<p>GOBankingRates spoke with experts about the flooring approach to retirement planning, how to do it, and the pros and cons. Read on for more.</p>
<p>If you want to make sure to have some financial cushion for extra spending in retirement, find out how much a comfortable retirement costs in your state.</p>
<p>Trending Now: Suze Orman's Secret to a Wealthy Retirement--Have You Made This Money Move?</p>
<p>How the 'Flooring' Approach Works</p>
<p>The flooring method entails determining how much you absolutely need to support yourself in retirement. This means having enough to cover basic living expenses.</p>
<p>"Creating a floor in one's income can be as simple as starting to [understand] your non-discretionary expenses. The concept of an income floor is not to handle all of your expenses, just the ones you can't live without," said Kyle Ryan, CFP, ChFC, financial planner at LPL Financial. "Once you understand your non-discretionary expenses, you can identify the monthly income your 'floor' requires."</p>
<p>You can 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 you're bringing in.</p>
<p>"Creating a floor in income during retirement is as much dependent upon one's psychology toward money as it is the amount and type of assets they have," said Ryan. "Receiving this income can come in many forms: Social Security, annuities, distributions from investment accounts, dividends, etc."</p>
<p>Here are the four steps you'll need to take to create a stable financial floor.</p>
<p>Determine Your Basic Needs</p>
<p>Start by figuring out your basic needs. Remember, the flooring method won't cover every expense you'll ever have in retirement. But it is designed to eliminate financial uncertainty in your retirement planning.</p>
<p>Basic needs include essential living expenses, such as:</p>
<p>Housing expenses</p>
<p>Groceries or food</p>
<p>Utilities</p>
<p>Healthcare premiums</p>
<p>Other insurance costs</p>
<p>Transportation</p>
<p>Debt payments, if any remain</p>
<p>Be Aware: I'm a Financial Expert: This is the No. 1 Mistake Americans Make With Their Roth IRAs</p>
<p>Set an Initial Goal</p>
<p>Next, create some short- and long-term financial goals that will get you to that stable financial floor.</p>
<p>"In my opinion, it is very important for many retirees to use some level of flooring," said David Orsolino, CFP, CLU, RICP at Strategies for Wealth. "Depending on a retiree's desired income, assets and overall objectives, a general rule of thumb can be [to set] 50% plus of desired income [as the] initial goal."</p>
<p>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, you can adjust your goal accordingly.</p>
<p>Establish Those Income Streams</p>
<p>Knowing how much you need is only half the battle. Once you've got your calculations, it's time to establish some steady income streams.</p>
<p>"Social Security, pensions or annuities with guaranteed lifetime income all qualify for 'flooring,'" said Orsolino.</p>
<p>As Ryan pointed out, other income streams could include investment account distributions or dividends.</p>
<p>Find out which income streams work best for you, and start saving and investing. This could mean regularly contributing to a 401(k) or IRA — and possibly taking advantage of employer-matching contributions. Or it could mean contributing as much as possible to an annuity. Weigh your options and get started as soon as you can to build that stability.</p>
<p>Take Things Further</p>
<p>You don't have to limit yourself to the essentials. Once you've established your financial floor, you can find other ways to increase your income. This might mean creating a secondary income stream that does get impacted by market fluctuations — like investments in stocks or other income-producing assets.</p>
<p>In the worst case, dips in the market will only impact your non-essential spending — like travel. You'll still have the basic "floor" you need to cover your retirement.</p>
<p>Pros and Cons of This Method</p>
<p>The flooring method has quite a few advantages, but there are also some downsides.</p>
<p>"Some of the pros would be peace of mind, having the guaranteed income, which mitigates the risk of longevity and market volatility. Sequence of returns risk is a major factor most retirees are not familiar with and can be a major factor in the outcome of one's retirement," said Orsolino.</p>
<p>"Having the guaranteed income, or the 'floor,' allows someone to take more risk with other assets if inclined to do so and more flexibility to how they distribute the other assets," he continued. "It's a strategy that works best when incorporated with other strategies, such us systematic withdrawal and bucketing, to produce an optimal retirement plan."</p>
<p>On the other hand, it can be limiting or even lead to a "boring" retirement lifestyle.</p>
<p>"Some of the cons of 'flooring' can be perceived as giving up the ability to gain upside, flexibility or the use of those funds used to create the flooring income," Orsolino.</p>
<p>Keep in mind that you don't have to stick with this method alone. You can, as Orsolino said, combine it with other retirement planning strategies.</p>
<p>Is the Flooring Method Right for You?</p>
<p>"It is dependent upon one's psychology toward money and the type of income and assets they have," said Ryan. "If one has worked their entire life and is used to having consistent cash flow, they may be more open to the concept of creating an income floor than someone who has been used to living off of savings or other assets, rather than income streams, to draw upon for regular expenses."</p>
<p>More From GOBankingRates</p>
<p>6 Costco Products That Have the Most Customer Complaints</p>
<p>Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard</p>
<p>How Middle-Class Earners Are Quietly Becoming Millionaires -- and How You Can, Too</p>
<p>4 Low-Risk Ways To Build Your Savings in 2025</p>
<p>This article originally appeared on GOBankingRates.com: The Flooring Approach: 4 Steps To Create a Stable Financial 'Floor' in Retirement</p>
Source: AOL Money
Source: AsherMag
Full Article on Source: Astro Blog
#LALifestyle #USCelebrities