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Do you know where your retirement income will come from?

Posted by Larry Jones on Apr 21, 2016 4:32:00 PM

Have you done your homework?

I have met with many folks who have some general idea of how much money they'll have in retirement. One of my roles as a planner is to try to determine exactly where your income will be coming from, and in what amounts. Wouldn't you like to know these things before you retire?

For some reason the Wall Street system has educated consumers on the idea that you should have everything in the stock market, leave it there forever, and assume you'll draw some magical percentage (such as 4%) for the rest of your life. Hopefully you'll be alright.

That plan scares me to death!


Let's take an example. Suppose you had accumulated $1 million dollars by the summer of 2007. Your plans were to retire at the end of August. Taking 4% would give you an annual income of $40,000 a year, which is fine with you, and you call it quits on schedule. 

By the fall of 2009 you would have been in a panic situation. The value of the S&P 500 declined by more than 50% over that time period. Now your million dollar portfolio is worh only $475,000. In order to keep taking a $40,000 a year distribution you'll now need to take nearly 8.5%! At this rate of drawdown your nest egg is not long for this world. Of course, the market came back, but on average it took 5 years to do it. Are you going to have to take a job at Wendys?

Instead, you should analyze all of your sources of potential retirement income, look at alternatives, tax scenarios, etc. and not put all of your eggs in one basket. 

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Topics: Retirement Income

Tax-Free Retirement Income (part 2)

Posted by Larry Jones on Apr 19, 2016 3:00:00 PM

In the last post

I spoke about the use of cash-value life insurance to grow wealth with very little risk to principal, a very competitive rate of long-term growth, and tax-free withdrawals through the use of policy loans. What's not to like?

How is this accomplished? Through the overfunding of your policy. Let's say your monthly premium is $100. What if you contributed $1000? Universal life policies are designed to allow excess contributions. Now...a word of caution here: a few years ago the IRS caught on to this concept of insurance policy overfunding, for the purposes of avoiding taxes, and set some rules (mainly the 7-pay rule, which I won't go into here) to prevent the abuse of these tax rules. Basically, if a policy violates the 7-pay rule, it is then designated a Modified Endowment Contract by the IRS, and the tax advantages largely disappear. However, the 7-pay rule is very generous, and overfunding of policies can still be done to a high level without creating a MEC. This is why you want the help of an advisor to avoid making a tax mistake that can bite you when you begin to take distributions.

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Topics: Retirement Income

Tax-Free Retirement Income

Posted by Larry Jones on Apr 14, 2016 2:30:00 PM

In the last post I spent

some time describing the benefits of supplementing your retirement income with cash value life insurance. My favorite is Equity Indexed Universal Life. I believe that, for a young person, these products deliver the most growth over time with the least risk. But there's another aspect of these solutions that I'd like to talk about- the tax benefits.

I heard a story about an insurance agent who was up against a stockbroker in trying to win the business of a client. This person had a certain amount of money to invest, and he had approached both of these fellows to prepare illustrations of future results. Of course, the stockbroker used an average rate of return north of 9% to calculate his, while the insurance agent was more conservative, using a 6% rate. As the two fellows presented their results to the client, the stockbroker was beaming. His future values were nearly 20% more over the time period. It was clearly, to the broker, no contest. Until the insurance agent interjected to the client, "Oh, I'm sorry. I didn't know that we were supposed to have to pay taxes on this money." 

The agent got the account.

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Topics: Retirement Income

What you don't know can hurt you!

As a fiduciary I am required to always act in your best interests, and as a professional planner, it's my job to be familiar with all types of possible solutions and financial vehicles. In short, I have no interest in selling any particular product or any affiliation with a particular company. I work for my clients.

Are you:

  • concerned that your tax bill is too high?
  • tired of watching your nest egg decline by significant amounts every 5-7 years?
  • wishing you could find more free time?
  • looking for ways to help protect yourself against litigation that could destroy all you have worked for?
  • worried that Uncle Sam is going to enjoy your retirement more than you are?

If any of the above describes you and you'd like to get a question answered then just click the button below and we'll be in touch.

Let's Meet!

p.s. we have the ability to meet virtually regardless of your location! Give us a shout!


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