Deciding what assets to use for income can be crucial in retirement. Most retirees become more conservative, so it may be time to convert higher risk assets into income through conservative balanced income funds or bonds. You could also consider Qualified Longevity Annuity Contracts (QLACs) that defer a portion of your required minimum distributions to age 85. QLACs use a deferred income annuity. Many advisers are now using deferred income annuities to buy blocks of guaranteed income in a laddering strategy where income is triggered at different times like ages 75, 80 and 85. The level of comfort you have with making investment decisions is a major consideration in deciding among the various payout alternatives. If you’ve been
investing successfully for
years, the prospect of
building a portfolio you
control with a lump sum
payout or an IRA rollover
can be appealing—and
realistic. Your challenge
will be producing enough
income during retirement. But if you don’t want to worry about outliving your assets, you may opt for the relative security of an annuity. Knowing that the same amount is coming in on a regular basis makes budgeting—and occasionally splurging—a lot easier. Another approach is to leave your account in your employer’s plan and take distributions on a schedule that   Read more…

There are four tax free income sources during retirement that you should be aware of and strategically employ to manage your annual taxes: Health Savings Accounts, Reverse Mortgage Income, Cash Value Life Insurance and Roth IRAs. Health savings accounts are one of the most underfunded resources in retirement planning. Tax deductible contributions up to $6,550 per couple and a “catch up” provision of an additional $1,000 for those over age 55. You can also do a once in a lifetime transfer from your IRA to your HAS up to the annual contribution limit. You can make tax-free withdrawals for approved medical expenses and premiums. Health savings accounts may be the most valuable tax advantaged source of funds over a lifetime and especially in retirement. You’ll use it. Reverse mortgage income is a housing solution for age 62 and older that may provide tax-free income for life by utilizing collateralized loans on your home equity. The program is called the home equity conversion mortgage (HECM) under HUD, and the FHA insures it. Reverse mortgage income has several flexible applications besides lifetime income that can really benefit retirees in planning their retirement. Cash value life insurance also uses the collateralized loans from   Read more…

It’s an amazing fact that the largest economy in the world has little to no financial education for its citizens compared to other western nations. Yes, public schools offer courses from basic math to advanced calculus, but not a course on balancing your checkbook. Even private parochial schools don’t teach how to handle debt, or save for college and retirement. But this vacuum of financial literacy could and should be filled by financial professionals as part of their “giving back” to their communities. Promoting your practice as a premier provider of financial education and services can push your business to the front of the line in the minds of consumers. It has to be altruistic and educational at its heart. It has to be about learning and not selling. It exists to offer a benevolent education to those in your sphere of influence, i.e. entrepreneurs, friends from your places of worship and those you interact with in financial sectors, like CPAs and attorneys. Even human resource departments experience difficulty in finding financial professionals who will offer mandatory 404c compliant education for their participants in their employer sponsored retirement plans. Many consumers in or near their retirement years attend multiple seminars   Read more…

Over the last twenty years, the financial industry at large has neglected the education and training of their advisers and insurance professionals. This neglect is a direct result of the industry’s cost to turn out qualified representatives. It’s expensive. Often a new agent or representative receives little to no education and training from the company who hired them. And depending upon the sector they entered, they generally become “single shingle” thinkers: i.e. wirehouses promote asset allocators, tax outlets center on developing tax consultants and insurance companies create agents who sell life insurance and annuities. Very few financial advisers are holistic and multi-dimensional enough to design plans for college, retirement and eldercare. The Academy of Coaching and Education (ACE) endeavors to educate financial professionals from the ground up and mentor them with one-on-one training. ACE has an approach similar to the altruistic consumer educators, The Society for Financial Awareness, whose mission is to deliver financial education to consumers. The methodology of adult education is quite different from high school and college students and ACE reflects those differences in its customized adult programs on money, financial planning and product fulfillment. The centerpiece of Ace is their case studies, real life applications of   Read more…

Recently, a bipartisan budget was passed. It seemed like everyone was relieved except Paul Rand(R), a conservative deficit hawk. Over 300 billion was added to the deficit, with all parties complicit signing the bill in red ink. The citizens of this nation cannot look to the government as a role model of financial stewardship. Indeed, the public education system is devoid of financial education on almost every level. Add to this debacle, that thousands of financial advisers, insurance agents and fiduciaries have done little to educate the financially illiterate in this country. In April of 2003, President George W. Bush inaugurated National Financial Literacy for Youth month. In 2006, The Financial Literacy and Education Commission issued a report entitled, “Taking Ownership of the Future: The National Strategy for Financial Literacy.” The report had several talking points supporting their outreach efforts and educational strategies for public awareness on topics such as credit, savings, and home ownership. The government’s heart might have been in the right place, but little has come of it. Non-profit organizations like the Society for Financial Awareness have taken up the gauntlet on behalf of consumers to do what the government seemingly couldn’t do, and that is to   Read more…

In 1900, retirement wasn’t a hot topic. Employers didn’t offer pensions, there was no Social Security, and the average life expectancy was 50. More than a century later, everything’s changed. More than 44 million people collect retirement benefits, and that number is expected to reach 72 million by 2030. And people are living much longer: Current estimates suggest that a million or more people now in their 40s can expect to live to be 100 or more. If you’d like more direction than “save as much as you can,” you might use the rule of thumb that says you’ll ideally have savings equal to 25 times the amount you’ll need to withdraw from your accounts the first year you’re retired to supplement the Social Security and pension income you expect to receive. You can start investing for retirement when you earn income for the first time. That’s when you can begin contributing to an individual retirement account (IRA). You can participate in retirement plans that your employers offer. If you work for yourself or own a small business, you can establish your own retirement plan. In fact, ideally, you’ll take advantage of several of these ways to accumulate retirement savings   Read more…

Employers who sponsor defined contribution plans have the right to automatically enroll you in their plan. With automatic enrollment, your employer decides the percentage of your salary that you contribute—often 3% with a built-in annual increase—as well as the type of investment you initially make: a target date fund, a balanced fund, or a managed account. If you don’t want to participate in the plan, you can refuse in writing. If you do participate, you have the right to change the default investment and the percentage you contribute. 401(k) Plan – at public and private companies and nonprofit organizations Annual contribution limits and vesting rules Balances portable when leaving job Transfers into plan may be possible Tax-free Roth option may be available in addition to tax-deductible plan 403(b) Plan – at nonprofit organizations Annual contribution limits and vesting rules Balances portable when leaving job Transfers into plan may be possible 
 Expanded opportunities to make catch-up contributions 
 Tax-free Roth option may be available in addition to tax-deductible plan 457 Plan – for state and municipal workers Annual contribution limits and vesting rules Balances portable when leaving job Transfers into plan may be possible 
 Expanded opportunities to make catch-up   Read more…

Rollover IRAs have some unique qualities. You can move any amount into your account, provided you’re moving it from an employer sponsored retirement plan or another IRA. You’re not limited to the annual ceiling on traditional and Roth IRA contributions. Watch part 3 Using a Rollover IRA from the series Saving for Retirement in Your Working Years with syndicated financial columnist and talk show host Steve Savant. You may be able to move rollover IRA assets into a new employer’s plan if the plan accepts rollovers. While some plans may accept any IRA assets, it’s smart to keep your employer plan rollover in its own account to avoid any possible roadblocks. The financial institution where you open your rollover IRA is the custodian of your account. As custodian, the institution is responsible for making the investments you authorize, keeping track of the paperwork, and reporting investment performance and account balances. But because most IRAs are self- directed, the custodian doesn’t make investment decisions on your behalf. Nor does it have fiduciary responsibility for the choice of investments you make. That means if you decide to put all your money into a risky investment, your IRA custodian isn’t responsible for advising   Read more…

: Your diversified portfolio is likely to be one-of-a-kind because the unique combination of factors that define your goals, timeframe, and risk tolerance won’t be exactly the
 same as any other investor’s. Mutual Funds Provides diversification 
 May not be focused 
 May not be fully invested Index Funds & ETFs (Exchange Traded Funds) Seek to replicate index results Transparency 
 May be more tax efficient 
 Poor performance in down market Individual Securities Investments must be balanced 
 Need a varied, representative sample 
 Can be costly to diversify Performance must be monitored Managed Accounts Professional management Advantage of multiple managers When you invest for retirement, you can select a portfolio of individual securities, mutual funds, and ETFs or choose a target date fund. Its objective is to build and then preserve assets, so that investors in the fund can look forward to a more financially secure retirement. To meet its goal, a target date fund assembles and regularly realigns a port- folio of individual mutual funds to: Help manage investment risk without significantly reducing return during the fund’s growth phase. Try to provide continued, if some- times modest, growth during the fund’s income-producing or asset-preservation phase Since cost   Read more…

An asset allocation model is a blue- print for spreading your investment capital among different asset classes. The most suitable model varies, based on an investor’s age, economic situation, and tolerance for investment risk, plus expectations about how the market is likely to perform. Comparing different ways to allocate may help you determine the model that might be best for you. AGGRESSIVE An aggressive allocation, which may be appropriate for young people or those with a steady source of fixed income, tends to emphasize equities, with as much as 80% to 90% of the portfolio being invested in stock, stock mutual funds, and stock ETFs. MODERATE A moderate allocation might assign between 50% and 70% of the total to equities, depending on your age, your financial goals, and your other financial resources, with the balance going to fixed income and some cash. CONSERVATIVE A conservative allocation, which may be appropriate for older people wanting to preserve capital and collect regular income, might assign 40% of the total to equities, with the rest divided between bonds and cash, depending on the economy and an investor’s personal financial situation. As you analyze an investment’s return remember that the gains or losses it   Read more…