Advertisement
retirement

How to Turn ‘Found’ Money into a Retirement Income Stream

Would you rather spend that extra cash or make it last a lifetime?

Save it or spend it? That’s the question to answer when you find extra money.

Kiplinger’s Personal Finance magazine headlined its February 2018 issue with great approaches when the figure at hand is $1,000, $10,000 or $100,000. I have some ideas, too.

The best opportunity with money that you unexpectedly discover – either from a windfall or cuts in spending you have achieved – in my view centers on “leverage,” meaning using something to maximum advantage.

‘Save or Spend’ Depends on the Context

When I consider the best use of $1,000, $10,000 or $100,000, it is in the context of creating the best retirement income plan for the investor.

Advertisement - Article continues below

My plans differ slightly from Kiplinger’s: a one-time infusion of $1,000 doesn’t do much for retirement, so I imagined scenarios for a client who indicates she can reduce her annual budget by $1,000. Or the couple who rediscovered a $10,000 IRA they forgot they had. The $100,000 involves the decision to reallocate a portion of liquid, short-term savings to long-term retirement savings.

$1,000

You could lease a car for $80 more per month or …

Add an extra $1,000 of yearly payments toward a more comprehensive long-term care insurance plan. That could give you and your spouse additional nursing home care that equals tens of thousands in savings several years in the future. Or perhaps a yearly life insurance bill that is $1,000 higher would buy a Boomer another $150,000 in life insurance proceeds that can be left to your beneficiary.

Advertisement
Advertisement - Article continues below

These actions might also allow you to comfortably take larger monthly payments from your retirement account today. In addition, insurance offers powerful tax benefits because the proceeds are received tax-free.

Advertisement - Article continues below

Leveraging an extra $1,000 a year in this way can benefit your current circumstances as well as your family’s several years from now.

$10,000

You could budget for travel, tickets, food and lodging for you and a friend at the Olympics or …

Buy income in the future in the form of a deferred income annuity, including a form called a QLAC.

Perhaps the $10K can buy lifetime payments of $5,000 a year starting at age 85. With that guarantee, you can feel confident to spend more of your savings early in retirement rather than hoarding in case you live a long time.

Those future payments can also improve your tax situation because your tax rate will probably be lower years from now.

This is clearly smart leveraging.

$100,000

You could renovate your house with all the high-end ideas you see on HGTV or …

Rework your retirement plan.

In most cases, the extra investment of $100,000 will make every aspect of your plan work better for you, from short- to long-term benefits.

If your retirement plan, for example, skimps on early-in-retirement payments, you can buy lifetime income starting immediately with an immediate annuity. Or you can draw your savings down faster if you ensure late-in-retirement payments from a deferred income annuity. Or a combination of the two.

In all of these cases, you can use the leverage of insurance products to gain maximum advantage. A little discipline will help you make the most of any found money, and even relatively small amounts can produce significant benefits.

About the Author

Jerry Golden, Investment Adviser Representative

President, Golden Retirement Advisors Inc.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.

Advertisement

Most Popular

HSAs Get Even Better
Financial Planning

HSAs Get Even Better

Workers have more options with flexible spending accounts, too.
July 2, 2020
2020 Stock Market Holidays and Bond Market Holidays
Markets

2020 Stock Market Holidays and Bond Market Holidays

Is the market open today? Take a look at which holidays the stock markets and bond markets take off in 2020.
July 1, 2020
Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020

Recommended

Find a Great Place to Retire
happy retirement

Find a Great Place to Retire

Our cities provide plenty of space to spread out without skimping on health care or other amenities.
July 2, 2020
Searching for the Perfect Place to Retire
Empty Nesters

Searching for the Perfect Place to Retire

We home in on two places with less traffic and lower costs. 
July 2, 2020
Hail to Your Finances, Regardless of Who Wins Presidency
retirement planning

Hail to Your Finances, Regardless of Who Wins Presidency

Don’t try to navigate your investment choices based on election uncertainty. And don’t wait to find out who wins in November to make financial decisio…
June 30, 2020
Resources for alternative forms of transportation needed by many older adults
retirement

Resources for alternative forms of transportation needed by many older adults

For many older adults, having an alternative mode of transportation may be the difference between independence and social isolation.
June 29, 2020