Adressing Retirement Risks
When I ask someone how much of the retirement income they would like either guaranteed or tax free, I get the same answer - “All of it!” There are tax laws specific to only the insurance industry that can help you with this.
We all know the stress of a financial loss such as a hard market downturn, or a poor investment can have during our working years. Imagine how it will be when you cannot replace the loss because you are not generating new working income, you don’t have as much time to recover, and your need for income now begins to take more of your principle, leaving you to need to earn more on what you have left. This creates more risk, fear, and more stress.
There are steps you can take to make sure that you will have a reliable income. Even for those of us that have a high risk tolerance, it is important to reposition assets between 10-5 years before retirement.
All of us must face the reality that a shift from how much we have, to how much we have to spend is a must.
Primary Risks
Loss of Principle just before or during retirement
Unknown Income Tax Rate
Squence of Returns - Timing of market corrections
These are some basic steps you can take to ensure your retirement lifestyle:
Guarantee Income - Decide the amount of income that you must have to cover overhead and your basic lifestyle. This can be done by shifting all risk to an insurance company through annuities. Annuities
Mitigate Taxation - Most of us have a substantial amount in qualified plans. IRAs, 401(k)s, and other plans. All of these are deferred income, so all the money you put away plus growth will be taxable when you take it out. Converting into a Roth will give you non taxable income during retirement without RMDs. There are insurance companies that have products designed especially for this purpose, that will help to offset taxes due on conversion.
Prepare for Long Term Care Expenses - One of the biggest financial drains on seniors is LTC. The expense is inevitable, we just don’t know for how long. With the passage of the Pension Protection Act, the IRS allows for qualified money to be used for LTC. There are insurance products designed around the PPA that allow you to use qualified money to plan for Long Term Care, and pass on what is not used, tax free to heirs. Long Term Care
Save for Tax Free Income - If you are under the age of 60, a properly designed life insurance policy can provide tax free income. In addition, the Kai-Zen plan can help you make up for money that should have been saved, and get your retirement goals back on track.