Consider the food supply chain: farm to store to kitchen. What does retirement income planning and the food supply chain got to do with each other?

One strategy to manage finances in retirement works similarly to the metaphorical food chain.

• You cultivate your crops, which equates to your long-term investment portfolio.
• You have grocery stores (your intermediate accounts), which remove the risks of growing crops and preserve your supplies as a ready source of food in the future.
• And finally, you have food in your kitchen to eat - your spending accounts that are stable and available to pay for expenses.

Your crops are the source of your food - your long-term retirement assets. Good and bad years are normal, but if the crops fail consistently, so goes the whole supply chain. Crops grow and your long-term portfolio must be built for growth. Growth requires time to overcome the bad seasons.

Numerous risks affect your growing crops. Plan for various risks, and try to manage your farming to minimize the risks while still producing healthy amounts of food. While some crops might fail, others must compensate so the supply of food to the store continues. Every year, you will harvest some crops to supply the store while the rest remain to growth future supplies.

After harvesting, supplies are stored for future consumption. This intermediate step no longer provides growth, but it must preserve food until it is time to stock the kitchen. Expect to tap these food stocks every few years. Preserving food is comparable to earning a conservative return without the risk of wide market fluctuations. Additionally, you don't want the food to sit on the shelf and spoil (i.e., earning nothing in a checking account).

Time to eat the food. This is the money you live on; the money that literally puts food on the table. Plan for a one- to three-year supply. This money must have stable value, liquidity, and safety because it must be there when you need it. It is not possible for this money to provide meaningful earnings or growth because stable, liquid, and safe (your primary objectives) do not pay. Your kitchen money comes from fixed income sources (retired pay, Social Security) and savings, checking, and money market accounts.

Before you develop your food chain, analyze how much food your crops can produce and whether this meets your food requirements. How will your fixed income sources reduce your need from the food chain? Will your crops provide an abundance of food in the pipeline, or will you need to go on a diet? Once you have a handle on the amount of food possible and control over your appetite, you are ready to establish your supply chain.

Bon appétit.