Jerry Golden on Retirement

Develop a plan for income allocation to truly simplify retirement

August 14, 2018 By Jerry Golden in Annuity Tags: Annuities, Guaranteed Income, retirement income

The Vanguard Group made news recently when it announced it would reduce the number of funds available to its investors. The goal, the fund said, is to minimize confusion.

Jack Bogle, the legendary finance expert who founded Vanguard (but who no longer runs it) said in an interview with Fox News that the fund could reduce the number even further.

“You could run a retirement plan with three or four choices: a stock index fund, a bond index fund [and] a balanced index fund,” Bogle told Maria Bartiromo.

Bogle earned his fame by simplifying the investment equation for everyday investors trying to save for retirement. So I won’t disagree with him, but I will add a line or two to his formula.

While Bogle is concentrating on accumulating savings through asset allocation – which is good as far as it goes – I want investors to develop a strong income allocation plan at and after retirement. This way, their savings will provide enough income throughout their retirement.

To create that income allocation plan, you need to add income annuities as a new asset class to the funds that Mr. Bogle suggests.

Learn more about income annuities at Go2Income.

Retirement Planning Job #1: How much income can your savings generate?

July 25, 2018 By Jerry Golden in Income Power Tags: Annuities, produce income, save money

People planning for retirement often approach me, in person or through my blog, and ask questions about whether they have enough money to retire, hoping I can ease their minds or make life easier for them.

One client recently asked: “I’ve got 10 years to go before retiring. I’m contributing at the max to my 401(k). Can I afford to retire?”

Contributing as much as you can to your 401(k), or other savings vehicles, is an excellent start. To fully answer my questioner’s query, though, I directed him to Income Power. It gave him an idea of how much income he can generate from his current savings. (Congress is working on a bipartisan plan to make this retirement information mandatory for 401(k) plans.)

With this piece of good news, we talked about lots of options for his retirement income plan.

Feel free to contact me at Ask Jerry with questions about your own retirement.

The biggest risk in retirement planning is not what you think

July 10, 2018 By Jerry Golden in Income allocation

People planning to retire often tell me their greatest fear is running out of money after they stop working. They have a valid concern, but the risk is not really about living too long. Instead, the issue that could bring calamity is the risk of failing to consistently follow a reasonable retirement plan.

Retirement planning must consider a couple of main points: You might live a long and healthy life, in which case you need money to continue so you can pay your normal bills. That’s called “longevity risk.” Or you might incur large and perhaps unreimbursed medical and caregiver expenses.

Keep on track

You can prepare for both, but once you create your plan, the tough part for many is to stay the course. That’s true particularly when investment returns are volatile and negative. Studies show that investors lose 1% or more on their returns when they are not in the market. This could mean five or more years in lost income.

However, unlike the risk of market returns, which no amount of diversification can fully allay, you can control the “stay the course” risk. All it takes is a little adjustment in your retirement planning, based on a simple premise: Reduce the amount of your income that is subject to the market – or what we call “income volatility.”

With preparation, you can reduce your income volatility during retirement by 50% or more. And, with the proper investment, you can get a 20% increase in income that lasts a lifetime.

You can achieve these results with an Income Allocation plan.

As I have written previously, income allocation’s twin goals are to increase the amount of after-tax (spendable) income and to reduce income volatility (for more dependability).

How income allocation works

Here’s an example for two new retirees age 70, and how income allocation compares to a traditional asset allocation plan in which all income comes from withdrawals from savings.

“Investor A” follows an asset allocation withdrawal strategy and invests 50% in the stock market and 50% in bonds. Withdrawals are set to last for 25 years assuming a blended long-term market return of 4.5%.

“Investor B” follows an income allocation strategy, using both withdrawals from savings and guaranteed lifetime income from income annuities. Some of her savings are used to purchase an immediate annuity with income starting at 70. She also uses a portion to buy deferred income starting at age 85. The balance is invested in a managed portfolio of stocks, bonds and cash, with withdrawals set to last for 15 years.

Unfortunately, soon after the start of the plan, a market meltdown occurs, just like in 2008-09.

Investor A, with all savings in an investment account with no guaranteed income loses $180,000 in account value.
Investor B loses $90,000 but still receives guaranteed income from her immediate annuity. She also has the peace of mind of knowing that income after age 85 is guaranteed for life.
Further, Investor B has a managed withdrawal program that takes some of current year’s withdrawal from the cash account. (I am preparing a study on managed withdrawal strategies and will post it soon.)

Who is less likely to stay the course?

Investor B is not happy with the market machinations, but her Income Allocation plan reduced her income risk. Investor A is more likely to change course. She might sell during the downturn in hopes of stanching the losses, or might reduce withdrawals – and her lifestyle – going forward.

Even the most expert advisor can’t protect against volatile markets. But when you consider all possible outcomes and create an income allocation plan as you prepare for retirement, you will be able to weather troubled times in the markets with confidence.

Please visit Go2Income to investigate an Income Allocation plan, as well as much more retirement planning advice. If you have questions, contact me at Ask Jerry. I will answer you myself.

How immigration policy is intertwined with Social Security

June 27, 2018 By Jerry Golden in Social Security Tags: immigration, Social Security

As usual, the country is dealing with many controversies, most of which tend to be debated as standalone issues. The fact is, they are often intertwined with one another.

Take the case of immigration and Social Security. No matter what opinion you hold about immigration, many political liberals and conservatives agree that the future of Social Security will be much worse without an inflow of immigrant workers.

A Bipartisan Policy Center white paper states that immigrants “can help boost economic growth and mitigate some of the demographic challenges created by an aging population and declining domestic birth rates.”

And N.Y. Post columnist John Crudele agreed earlier this year, writing that “the only answer to keep the Social Security pyramid functioning is to allow people from other countries to come here to work, pay taxes and contribute to Social Security.”

I have written about potential solutions in the design and financing of Social Security here, here and here. The longer we wait to address the issues, the more difficult it will be to solve them.

Share your thoughts about Social Security. Write to me at Ask Jerry.

Earn up to 20% more in retirement with income allocation

June 19, 2018 By Jerry Golden in Annuity Tags: Annuities, Dependable spendable income, Guaranteed Income, Income allocation, retirement income

Income will determine whether your retirement is financially successful.

When you have enough income, you feel more secure. You worry less. You can spend more time doing what you want with people whose company you enjoy.

And from an investment perspective, you’re more likely to “stay the course” and not jump out of the market.

A new study shows how an income allocation strategy beats the traditional strategy of asset allocation, and delivers that additional income with less risk. Here’s a good description of the income allocation strategy.

The study examines different risk profiles for a 70-year-old male or female who, over the rest of their lives, will generate more income, lower volatility and a higher economic return when an income allocation strategy is implemented. Implementation for your age and risk profile will need to be customized, of course, to your personal circumstances.

For a free, no-obligation copy of my income allocation study, send a request to Ask Jerry.