You might think I sound presumptuous when I say that a new era in retirement planning has begun.
But I plan to prove it to you.
An innovative difference
A new retirement planning method demonstrates that by properly allocating the smartest sources of income, you can create more income with less market risk — for the rest of your life. And you can do most of the research on your own.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Retirees and people planning for retirement can follow any number of paths. Most consider — or have been offered — only a fraction of them. Online tools, investment advisers and financial planners supply limited options.
Why? The biggest problem is that most retirement advice favors an allocation of assets — stocks, bonds and cash, paired with an algorithm for withdrawals — designed to make the money lasts as long as the retiree.
Most tools — such as the popular Monte Carlo Analysis — can handle only a few of these asset allocation strategies, thus ignoring major categories of financial vehicles and leaving retirees with market risks. Advisers often guide customers to products that they are already selling. And many are not educated on all the ways retirees can create income security.
When you instead build your retirement on the allocation of income among dividends, interest, annuity payments and withdrawals, you can achieve both higher and safer income. I call it the Income Allocation Planning (IAP) method, and it’s available as a free, no-obligation service at Go2Income.com.
How Is Income Allocation different from Asset Allocation?
The twin goals of the IAP method are to increase the amount of after-tax (spendable) income and to reduce income volatility (for more dependability). IAP differs from traditional retirement planning in three ways:
Step 1 uses annuity payments to provide guaranteed lifetime income. Advisers often ignore annuity payments as an option.
Step 2 treats rollover IRAs differently than personal (after-tax) savings accounts for optimal tax efficiency. Most calculators have a single investment allocation.
Step 3 manages withdrawals from rollover IRAs. Most advisers suggest retirees just withdraw IRS mandated required minimum distributions from IRAs.
How much more income will Income Allocation generate?
Go2Income’s Income Allocation tool enables the visitor to the site to create a customized plan on their own. (And makes available specially trained Go2Specialists to review the plan designed from the tool.)
Set out below is a sample chart from the Go2Income site for a woman age 65 with a total of $2 million in savings (half of which is in a rollover IRA). Based on the assumptions listed underneath the chart and those provided in a detailed report the visitor can order, the income advantage vs. an Asset Allocation strategy is over $11,000 in the first year and over $850,000 cumulatively through age 95.
Here are the key underlying assumptions:
- Stock market return after fees: 6%
- Fixed income return after fees: 3%
- Annuity purchase rates: proprietary Go2Income methodology
- Asset allocation: 50% to equities; IRA withdrawals to 95
The right combination of DIY and specialists
Too many people feel they can’t make their own decisions about retirement. That’s partly because they don’t have all the information they need. It’s also because they haven’t educated themselves.
Now, instead of relying exclusively on your financial adviser to direct your retirement plans, the Income Allocation tool enables you to adjust inputs and create your own retirement income plan. It gives you solid information — and a range of potential solutions — that you can bring to your adviser for discussion.
Go2Income has specialists who can talk to you about the results you get from our tool, but they aren’t the only advisers you should consider. I urge you to examine all your options. Try out other tools and compare the results. Talk to a number of advisers before you choose one to guide you.
-
The $1 Million Retirement Question: Are You Being Tax-Smart About Your Pension?A financial planner raises some key considerations for navigating retirement with a pension and recommends four strategies.
-
The Costly Mistake You Might Be Making With Your First 401(k)Most people start contributing to their retirement savings later in life. That could be a big-time mistake, literally costing you thousands of dollars.
-
An Estate Planning Attorney's Guide to the Importance of POAsRegularly updating your financial and health care power of attorney documents ensures they reflect your current intentions and circumstances. It's also important to clearly communicate your wishes to your chosen agents.
-
Divorce and Your Home: An Expert's Guide to Avoiding a Tax BombYour home is probably your biggest asset, so if you're getting a divorce, the stakes are high. Keep it? Sell it? You need to have a good plan in place for how to handle it.
-
Fewer Agents, Fewer Audits: How IRS Staff Cuts Are Changing EnforcementSignificant reductions in the IRS workforce appear to be increasing the number of 'no change' audit closures. The shift could potentially increase the overall tax gap — the difference between taxes that should have been paid and those that were.
-
What if You Could Increase Your Retirement Income by 50% to 75%? Here's HowCombining IRA investments, lifetime income annuities and a HECM into one plan could significantly increase your retirement income and liquid savings compared to traditional planning.
-
Here's Why You Shouldn't Do an Estate Plan Without a Financial PlannerEstate planning isn't just about distributing assets. Working with a financial adviser can ensure you've considered the big picture — and the finer details.
-
Trump Tariffs and Taxes: Waiting to See What Happens Is Not a StrategyLike presidents, tariffs come and go. Policy changes also shift about every two years with the election cycle. If you're paralyzed by uncertainty, you could be missing opportunities to benefit your financial future.
