Retirement Income Strategies

Growth Plus Protection

Where will your retirement money come from? If you’re like most people, your 401(k), Social Security, personal savings, and investments all play a role. But without a paycheck coming in, you’ll be spending your savings instead of putting money away. It’s a whole new way of thinking! And retirement income planning prior to retirement—anywhere from five to 10 years in advance—is vital to avoid running out of money.

Remember, a tax-deferred retirement account like a 401(k) is not a retirement income plan. You will have to pay ordinary income taxes on that balance even if you don’t need the money, which could mean you only have around 63% of what you think you have if you end up in the 37% income tax bracket. And if your non-spousal heirs inherit that money, they will have to empty the account within 10 years, take distributions, and pay taxes at their own income tax rate.

Call us for a quote at (757) 515-2220 or choose a meeting time right here

What is an FIA (Fixed Indexed Annuity)

An annuity might help you convert your retirement savings into a monthly income that can last as long as you live. You can sometimes think of annuities as your own personal pension. But not all annuities are the same. Learn more about fixed indexed annuities with potential for market growth plus protection.

Here Are Some of the Risks You Must Watch Out for In Retirement

1) The first risk you face in retirement is living for a very long time. Today’s retirees can spend 20, 30, 40 years or even longer in retirement. Even though we all want to live a long life, longevity risk in retirement can make all your other risks compound. We will help you consider ways to generate income that won’t run out.

2) Taxes are another thing you will face. All the money you have saved in a traditional 401(k) or IRA account will be subject to ordinary income taxes in the year when you withdraw it. By planning in advance, you may be able to shift some of your taxable money into tax-free accounts like Roth accounts. Although you will pay taxes in the years that you do any Roth conversions, in some cases, you may save a lot more in taxes over the long-term.

3) Speaking of income taxes, you won’t be able to get away from them if you have money in taxable retirement accounts. Beginning at age 73, RMDs (Required Minimum Distributions) are mandated by the government every year, by December 31, not April 15 Tax Day. This surprises some people, and sometimes throws them into a higher tax bracket than they ever anticipated. RMDs have strict rules and carry steep penalties if the rules aren’t followed in terms of how much to withdraw and from which accounts.

4) It’s not just you who will owe taxes on traditional 401(k) money. If you pass away, your non-spousal heirs must start taking RMD withdrawals, and empty an inherited account completely within 10 years of inheritance. This can throw them into a much higher tax bracket, leaving them with a much lower inheritance than you thought.

5) Other risks in retirement include inflation risk, which can dilute your purchasing power. Market risk, which can deplete your 401(k) if there are stock market downturns at the beginning of your retirement but you continue to have to withdraw money anyway. There is the risk of developing a disability like Alzheimer’s and needing long-term care—such as help with the tasks of daily living including bathing, eating and dressing—which can be extremely costly.