While most retired families have an IRA Account and a home, very few are considering how they could work together in a plan for retirement income. Read this article to the bottom and get a complimentary plan that does just that.   

Baby boomers earn the description “Mass Affluent,” by growing their finances during their working years until, at a minimum, they can claim $500,000 in assets to pay for retirement. Much of that money is held in a Rollover IRA Account. These assets plus the value of their home amount to $10+ trillion for these mass affluent boomers.

Retirees with these substantial assets, though, still face challenges, including:

• Distributions from the Rollover IRA account are taxable.
• Most such distributions require the sale of IRA account assets, with related market risk.
• These distributions reduce liquidity that might be needed for unplanned expenses.
• Maintaining the home while aging-in-place carries significant costs.
• Retirees don’t generate income from their homes to pay for these costs

The answer may be to see the savings in the IRA Account and the value of the home together, and to use a planning system that allows each to complement the other and produce the best opportunities for income, liquidity and legacy.

It might be daunting to do that research yourself. But Go2Income has put together an IRA2Income program that takes these asset classes and integrates their strongest features.

Real Life Goals

Our sample investor, a female, age 70, with $1 million in her Rollover IRA Account and $1 million in the value of her home, hopes she can meet these financial goals:

Income: 6.5% on IRA savings, or $65,000 in first-year starting income

Liquidity: $1 million at age 85 to meet unplanned expenses

Legacy: $2 million at age 95 to pass on to kids and grandkids

They are not unreasonable goals, she thinks. However, although not trained as a retirement expert, she knows that with the IRA alone she’ll be spending down her savings.

IRA2Income Allocation

She clicked on the Go2Income landing page and ordered a complimentary plan. Here’s how IRA2Income allocates the savings for this sample investor:

• From her IRA Account
  • Balanced portfolio (50/50) between fixed and equity portfolios — $650,000
  • Immediate income annuity — $200,000
  • Future income annuity (QLAC)— $150,000
• From the value of her home
  • HECM line of credit — $370,000

Notes: QLAC is a Qualifying Longevity Annuity Contract, a type of deferred annuity that pays income by age 85. For an in-depth description, read “For Longevity Protection, Consider a QLAC.” HECM is short for Home Equity Conversion Mortgage. Read more in “How to Add Home Equity to Your Retirement Income Planning.”

IRA2Income Plan: Income, Liquidity and Legacy Results

Here are the year-by-year results the IRA2Income Plan returned showing how she met her goals:

Sources of Income (Starts at $67,000)

Our investor’s income comes from both the IRA Account and drawdowns from HECM. In turn, the distributions from the IRA account are made of guaranteed income from an annuity and payments from a balanced portfolio of fixed and equity investments. After age 85 the HECM drawdowns are replaced by annuity payments from QLAC, minus the interest on HECM.

Sources of Liquidity ($1,016,000 at Age 85)

Liquid savings provide peace of mind that unexpected expenses can be met. The HECM line of credit adds to the liquidity from IRA Account, particularly after age 85. Importantly, accessing the line of credit does not create a taxable event, nor create a possible market risk with the sale of portfolio shares.

Sources of Legacy ($1,900,000 at 95)

With an IRA2Income plan that considers both your IRA Account and the value of your home, our investor is able to come close to her $2 million legacy objective. Importantly, while the IRA account values at passing are taxable, the value of the house is not.

IRA2Income: Some added benefits

As IRA2Income combines assets to meet the retiree’s objectives as to income, liquidity and legacy, it creates a series of added benefits, including:

• Lower Taxes — About one-third of income is received tax free until 85
• Lower Risk — Only one-third of retirement saving is in equities
• Predictable income — Annuity payments and HECM drawdowns don’t depend on market performance

IRA2Income: Comparison to Current Plan

Our investor then compares IRA2Income to her existing plan. She tries to match the income and market risk.

To match the income of IRA2Income of $67,000, she needs to withdraw all that amount from her IRA Account. Those annual withdrawals — and the lost returns — eat into the account, leaving only $500,000 at age 90, possibly enough to cover a relatively minor long-term healthcare event. By 95, that account is wiped out and she’s living on Social Security benefits. She still has the value of the house, but Social Security is barely paying the bills. Finally, her taxes at the start are nearly three times what she would pay at the beginning of her IRA2Income plan.

Is her new plan too good to be true? No, IRA2Income simply combines two assets and within each asset class uses the smartest options.

Get your complimentary plan and talk to the Go2Income specialist. Make sure it reflects basic information (spouse, savings, etc.), and talk through refinements that make it fit your objectives. Then consult with a qualified adviser for plan refinement and implementation options.