This Underused IRA Option Offers Both Tax Benefits and Income Security

April 13, 2025 By Jerry Golden in Annuity Tags: Annuities, healthcare needs in retirement, tax benefits

Looking to avoid running out of money in retirement? Consider longevity protection provided by a QLAC as a component of your retirement income plan.

A little more than 10 years ago, the U.S. government did something right for retirees. It created the QLAC as a way to provide longevity protection on a tax-favored basis using savings in an IRA or other qualified account. Here’s how the bill was framed:

“All Americans deserve security in their later years and need effective tools to make the most of their hard-earned savings,” the IRS said of the rationale for QLAC. “As boomers approach retirement and life expectancies increase, longevity income annuities (our emphasis) can be an important option to help Americans plan for retirement and ensure they have a regular stream of income for as long as they live.”

As part of new legislation passed in December 2022, the SECURE 2.0 Act addressed many areas of retirement, including increasing the amount that can be invested in a QLAC to $200,000. As important, the law also eliminated a requirement that limited QLAC premiums to 25% of an individual’s retirement account balance. Finally, in January 2025 the limit was further increased to $210,000, up from the original $125,000. Taken together, that means a single investor with $400,000 of IRA assets could more than double their QLAC allocation from $100,000 to $210,000.

Retirement Income Planning for Unfunded Health Care Costs

April 12, 2025 By Jerry Golden in Annuity Tags: Annuities, health care costs, tax benefits

Oftentimes, retirement income plans don’t include late-in-life health or long-term care expenses. Here’s how to cover for the unplanned withdrawals to pay for those.

At lunch recently, a friend said he was about to meet with his financial adviser, who had prepared a 20-page report that, he told me, “will wrap up everything” about his retirement. I asked whether it would address long-term care or similar needs. He wasn’t sure.

I followed up: “Do you and your wife have LTC insurance?” Nope. He didn’t qualify when they applied years back.

So, the 20-page report will not cover “everything” my friend needs to consider for retirement.

Expenses for health care are often referred to as unplanned expenses, but actually they are expected; at least 70% of us will experience a long-term health event in our later years. So, I refer to these expenses as planned but not currently funded. The best plans account for them in retirement. (Unplanned expenses are what thousands of Los Angeles residents experienced this year with the wildfires.)

Jerry’s Retirement Ideas

November 10, 2020 By Jerry Golden in Income Allocation Tags: annuity payments, Income allocation, Income annuities, income for women, Jerry Golden, tax benefits

Women Generate High Retirement Income Nearly Tax-Free!

IRS Tax Rules Favor Females

One of the lessons that women learn as they make plans to convert their retirement savings into income is that they should plan for lower income than a man might take from an account of the same size.

That’s because women live longer, and they need to ensure their savings last longer.

The IRS, however, is not allowed to consider gender when it writes its tax rules. That means women can use some of their personal (after-tax) savings to buy annuity payments and benefit from their favorable tax treatment. Suddenly, gender is a plus, not a negative.

Payments from an income annuity purchased with personal savings receive a tax break because a portion of each annuity payment is considered a return of previously taxed principal, until the principal has been paid out. Looking at an annuity quote as of Nov. 7, a female aged 70 with $1 million can generate $66,712 per year in guaranteed lifetime annuity payments and be taxed on only $2,535 per year until age 85. After age 85, when payments become fully taxable, she is likely to have larger tax deductions from unreimbursed medical and caregiver costs.

In the example above, 98.5% of the income is received income-tax-free, translating to less than $1,000 a year in taxes.

While men receive a tax benefit, too, it’s not as large as the one for women.

In this environment, generating more income from annuity payments is crucial; paying fewer taxes is just icing on the cake.

Finally, a win for women everywhere.

Click here to get an annuity quote and the tax benefits you can get. Or contact me for a conversation about even more tax benefits.

New ideas take patience and perseverance to become self-evident

July 1, 2019 By Jerry Golden in Annuity Tags: Annuities, guaranteed lifetime income, retirement income, tax benefits

The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man. – George Bernard Shaw

After four decades of inventing financial products that help people figure out how to retire comfortably, I am accustomed to the resistance these new ideas face. Please forgive me for trying to adapt the world of financial products to what I believe retirees and pre-retirees need.

As I’ve written about in this blog, I often critique financial advisers of all types who insist that their clients adapt their plans to the confines of whatever options the adviser’s business model supports. When it comes to retirement income planning, that model usually involves a pie chart of asset allocation, and a market simulation of when your income runs out.