Income Allocation Archives - Page 5 of 7 - Jerry Golden on Retirement

Five ways to increase your after-tax income and legacy (And plan ahead for April 15, 2020)

April 8, 2019 By Jerry Golden in Income Allocation

Over dinner with friends who live in the Northeast, they expressed concern about how the recent tax changes may increase their federal income taxes. They’re right to worry. New rules limit the amount of property and state income taxes that can be deducted – and they live in a high-tax state.

Like everyone, I am a fan of legally minimizing your taxes. But I think – if you are retired or about to retire – you should concentrate less on minimizing taxes and more about increasing after-tax spendable income and your financial legacy to heirs. Sounds like a non-sequitur, but it isn’t.

As an example, you could invest your entire savings in high-quality municipal bonds and pay no taxes on interest earnings. But you would earn something like 2.5% in annual income. Wouldn’t it be an improvement if you paid some taxes and generated an income stream equal to, say, 6% after taxes.

Make retirement simpler: From target date funds to income allocation plan

March 4, 2019 By Jerry Golden in Income Allocation

The financial industry figured out how to improve saving before retirement, and 401(k) investors are taking advantage.

The idea is simple: create an investment choice that allows you to “set it and forget it” until you retire. These options available in a 401(k) plan are called target date funds (TDF). If you elect a TDF when you’re young, the fund automatically recalibrates as you age, becoming more conservative as you near retirement. In that way, the fund captures growth and is less likely to experience severe setbacks from market downturns as you approach retirement.

An article in the San Francisco Chronicle says Vanguard reported that just over half of participants in the 401(k) plans it administers are invested in a single target date fund. These funds account for one-third of the assets in all 401(k) and other defined contribution plans run by Vanguard.

Retirement Planning Reinvented

February 28, 2019 By Jerry Golden in Income Allocation Tags: Income allocation, Jerry Golden, retirement income

You might think I sound presumptuous when I say that a new era in retirement planning has begun.

But I plan to prove it to you.

An innovative difference

A new retirement planning method, available here, demonstrates that by properly allocating the smartest sources of income, you can create more income, with less market risk — for the rest of your life. And you can do most of the research without an advisor.

Retirees and people planning for retirement can follow any number of paths. Most consider – or have been offered – only a fraction of them. Online tools, investment advisors and financial planners supply limited options.

Why? The biggest problem is that most retirement advice is geared toward asset allocation. Most tools can handle only a few strategies based on the allocation of assets, thus ignoring major categories of financial vehicles and leaving retirees with market risks. Advisors often guide customers to products that they are already selling. And many are not educated on all the ways retirees can create income security.

When you instead build your retirement on a foundation of income allocation, a new world opens up.

Sources of income create income security

For most Boomers, the greatest fear in retirement is running out of money. Income Allocation logically focuses on allocations of income among dividends, interest, annuity payments and withdrawals (early in retirement) and between Rollover IRA and taxable accounts (for tax efficiency). The result is lifetime income, and more of it, and actually more liquidity. In the long run, you will also increase the financial legacy you can leave as well.

Are Income Annuities fair? Or do annuity payments improve your retirement income plan?

February 20, 2019 By Jerry Golden in Annuity, Income Allocation Tags: Income allocation, Income annuities, retirement income

analyzing annuity payments in retirement

If you get a chance, you might read this article “Why Retirees May be Wary of Annuities”. Written by two knowledgeable academics and based on a study of consumers, the authors concluded that the aversion to income annuities may be related to a question of fairness, i.e., insurance company holds on to part of the annuity reserve at the death of the annuitant.

At the end of the article, the authors suggest that what’s needed for annuity acceptance is a “highly personalized approach, in which the [planning] solutions are tailored to reflect the goals, circumstances of the individual.” That’s what we’re trying to do with our new Income Allocation Tool.

2019 New Year’s Resolution: Fix my retirement plan

January 8, 2019 By Jerry Golden in Income Allocation Tags: Income allocation, Income annuities, retirement income

Most people, particularly those in or near retirement, are concerned (and for good reason) about what the market performance in December did to their retirement plans. My friends, knowing what I do, ask me, “So, what do you think about the market?”

My answer to them is, “We’re OK, but the kids will inherit less from my retirement accounts if my wife and I are hit by the proverbial bus tomorrow.” In other words, my income is safe and relatively unaffected by market results even as my overall account has slimmed down.

If your New Year’s goal is to “Fix my retirement plan,” this article will give you five steps to accomplish your resolution. You’ll be able to “set it and forget it,” so you don’t have to make it again year after year.

Step One – Find your retirement income potential

As a first step, take a few minutes to determine your Income Power. It’s a simple calculation that shows you how much income your retirement savings can generate — starting at your retirement, increasing over time, and continuing for life. I explain it in full here.

At the same time, update or find your latest Social Security projection. Combine the two for an idea of your potential income. Of course, you’ll need the right kind of retirement plan to reach your full potential.