Adressing Retirement Risks
When I ask someone how much of their retirement income they would like either guaranteed or tax free, I always get the same answer - “All of it!” There are tax laws specific to the insurance industry that can help you address multiple risks including taxation and market risks while maintaining a competitive ROI.
We all know the stress of a financial loss such as a 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 won’t have as much time to recover, and your need for income will begin to take more of your principle, leaving you a need to earn more on what you have left. This creates more risk, more fear, and more stress, which can destroy retirement.
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 should make a shift from focusing on accumulation to protecting what we have, and maximizing our in pocket cash flow.
Primary Risks
Loss of Principle just before or during retirement
Unknown Income Tax Rate
Squence of Returns - Timing of market corrections
Expenses of health and longevity
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 rollout. Roth Converstion
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 into a Tax Free Environment - Cash value life insurance can be an excellent way to save for retirement. Life Insurance
If you are under the age of 60, a life insurance policy that is properly designed for accumulation can provide tax free income. In addition, using leverage with the Kai-Zen plan can help you make up for money that should have been saved, and get your retirement goals back on track.