Income Allocation Archives - Jerry Golden on Retirement

Retirement Accounts Are Taxed Differently. Plan Accordingly.

August 17, 2023 By Jerry Golden in Income Allocation Tags: Income annuities, lower taxes, retirement income

When you plan your retirement and do not distinguish between accounts with pre-tax and after-tax savings, you are likely to make less-than-optimal choices of financial products and product allocation. The wrong choices could lower your spendable income and after-tax legacy.

As you formulate your plan for retirement, you may be pleased with the amount of money saved over your working life and now invested in your after-tax investment accounts, IRA/401(k) accounts, and as equity in your house. Yes, you can convert your savings to income in a variety of ways, but how you plan and allocate income among investments and annuities — and between accounts — can enhance your ability to take vacations, make gifts, provide healthcare and generally support your lifestyle for the rest of your retired life.

I’ve said before that while planning for retirement income is not rocket science, there are literally trillions of potential plans you could design with your advisor. Naturally we want to make it easy for you to choose one — without a degree in investment management or actuarial science. However, there’s one area we can’t oversimplify: Do not treat all your savings alike in creating your plan.

Factoring Inflation Into Your Retirement Plan

December 3, 2021 By Jerry Golden in Income Allocation Tags: budget, income, income plan, Inflation, retirement, Retirement Planning

Right now, inflation is top of mind for everyone, including retirees.

Inflation is important. But it is only one of the risks that retirees have to plan for and manage. And like the other risks you have to manage, you can build an income plan so that rising costs (both actual and feared) do not ruin your retirement.

Inflation and Your Budget

Remember that in retirement your budget is different than when you were working, so you will be impacted in different ways. And, of course, when you were working your salary and bonuses might have gone up with inflation, which helped offset long-term cost increases.

What’s Your Retirement Number? Don’t Just Go By The 4% Rule

October 4, 2021 By Jerry Golden in Income Allocation Tags: 4% rule of thumb, Income allocation, Income annuities, plan for retirement, Retirement number

Numbers rule our retirement decisions, and we usually have questions about them. At what age will we stop working full time? How long of a retirement should we plan for? What do today’s low interest rates mean to our future income? Can we count on a reasonable dividend yield from our stock portfolio? What percentage of our income should be guaranteed for life, through Social Security, pension income and annuity payments?

Dollars or Percentages

We also look at retirement income as both dollar amounts and percentages. Should we try to replace 100% of our former income during retirement? Or should we set a fixed budget and find a way to meet that amount? You can determine which approach appeals to you by thinking about your last mortgage refinance. Did you congratulate yourself for shaving a percentage point or two off the mortgage rate, or plan for ways to spend the extra $300 you saved every month?

Even the Experts Can’t Figure Out How to Plan for Retirement Income

September 18, 2021 By Jerry Golden in Income Allocation Tags: annuity payments, Go2Income, Income allocation, Jerry Golden, retirement income

An article in The New York Times, “How to Enjoy Retirement Without Going Broke,” is a reminder that experts — from Nobel Prize winners to financial advisors — are challenged by planning for retirement income. It also showed that those who provide investment advice are stymied by this almost universal problem for a large part of the retiree market.

On the academic side:

“It’s really nasty. It’s the nastiest, hardest problem I’ve ever looked at,” said William Sharpe, who won the Nobel Prize in economics and reported his progress on the problem of how retirees can manage their financial assets without running out of money: “I can’t say I’ve found some magic solution, because I haven’t.”

On the advisor side:

One advisory firm appears more confident than the academics with brochures touting “7 innovative ways to generate income from your nest egg.” On the other hand, they also “hate annuities” and their firm’s reward system – we make money when you do – is based on having clients take market risk, rather than providing secure income.

Lower Your Future Income Risk by Taking Action Now

August 29, 2021 By Jerry Golden in Income Allocation Tags: adjust portfolio, annuity payments, Income allocation, Jerry Golden, retirement income

The news about the stock market has been wonderful for a lot of your retirement savings. The portion of your portfolio invested in the stock market has recovered from the thrashing the pandemic delivered and, if it followed the broad market, it has reached new highs.

However, other aspects of the economy aren’t necessarily the most favorable for individuals entering or in retirement:

Interest rates are still low by historical standards.
Expenses, such as travel, food and your car, have increased. Home prices have jumped too.
Federal income tax rates may be going up.
And, of course, there’s always the possibility of a stock market correction