How Middle-Income Boomers Are Planning For Retirement

Conceptual one way signs on Life

Conceptual one way signs on Life

Jim Lorenzen, CFP®, AIF®

According to a survey conducted by Bankers Life Center for a Secure Retirement, middle income boomers aren’t paying much attention to planning for their old age.

Here are some of the results:

While 61% have taken at least one step in retirement planning, about only 1% have taken all the steps.

Only 25% have calculated a monthly retirement goal – no information on what method they used – but only 12% have translated that into an account balance goal.

Only 9% have developed a formal, written plan (how this happened with only 1% having completed all the steps, noted above) is a little interesting.

Nevertheless, they still have some work to do, it appears.   Maybe a good first step might be attending our retirement planning webinar this coming Saturday.  They can learn more and register here.


Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® serving private clients providing retirement planning and wealth management services since 1991. Jim is Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Retirement Webinar Announcement: This Saturday, October 1st

iStock Images

iStock Images

I’ll be conducting a retirement webinar this coming Saturday, October 1st.

Who would benefit:  “Baby Boomers” planning for or nearing retirement and desiring to put a plan in place.

You can learn more about the webinar and register here.

When you register, you’ll automatically be signed-up to receive our weekly ezine and, as a bonus, you’ll also receive a retirement income planning tool you can use to help get your own ‘ducks lined up’.  I think you’ll find it quite useful.

Jim


Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® serving private clients providing retirement planning and wealth management services since 1991. Jim is Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

What if Retirement Plan Statements Stated the Facts?

iStock_UncleSamLiftingWallet_MediumThe next time you open your 401(k) or IRA statement and see your current balance, it might be worth remembering it isn’t true.  The balance, you see, isn’t all yours!

Remember how many times you’ve heard the phrase tax deferred?     You’ll avoid taxes only as long as you leave the money untouched; of course, by age 70-1/2 or thereabouts you’re going to have to take some money out, whether you like it or not, because Uncle Sam wants his cut.

Then, the truth hits:  You’ve been growing money for Uncle Sam, too!

If you’re in a combined state and federal income tax bracket of 33%, it means only 66% of the balance you see on your statement is really yours – or ever will be.

For example, if your tax-deferred retirement plan statement indicates you have $500,000, remember it’s illusory.  Your tax bracket will 6a017c332c5ecb970b01a73dd6e411970d-320widetermine how much Uncle Sam will get – and Uncle Sam is not only the one who ‘writes the rules’, he also determines when he wants to do it.

If your combined state and federal tax bracket is 30%, for example, Uncle Sam’s balance in your account is $150,000.  Your balance is $350,000 – unless Uncle Sam changes his mind about your bracket.

So, the next time you look at your tax-deferred balance, you might want to whack-off Uncle Sam’s cut and enter the remaining balance on your own balance sheet – it will probably be a closer representation of what you really own when all the dust settles.

There are some steps you can take to reduce or potentially eliminate income tax in retirement, if you’re prepared to do what it takes today.

You have to ask yourself:

  • With an aging population demanding services, do I feel confident Uncle Sam won’t raise taxes in the future on those who’ve worked and saved?
  • With the “official” national debt over $19 trillion – and the real debt more like $89 trillion – do I feel confident Uncle Sam will simply manage better and keep taxes where they are on those who’ve worked and saved?

If you feel good about trusting their management of your money over the next thirty years, you may even be content with your tax status moving forward.  If not, you may want to begin exploring your options.

IFGi_4 Steps to a Tax Free Retirement_001Here’s a short report you might find interesting as a first step in your process.

You can access it here.  I hope you find it helpful.

 

Jim

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Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742. IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

IS IT TIME TO RETHINK (Dump) THE 401(K)?

6a017c332c5ecb970b01a5116fb332970c-320wiMany Believe It Is…. including some well-known experts
Jim Lorenzen, CFP®, AIF®

In his book, The Retirement Miracle, Patrick Kelly writes about a man who had built-up a 401(k) balance of over $2 million over his career.  Then, on the brink of retirement, his world was shattered.  It was a September day in 2008.  He’d lost about 10% of his nest-egg in a single trading day.   By October 7th, he found his balance was down to $1.5 million!  By the time he reached his last day of work, his account was down to $1.2 million – actually about $1 million less than what it had been before all this happened.

And, just as an aside,  if that wasn’t bad enough, that $1.2 million had an embedded tax liability.  If this man was in the 30% combined federal and state tax brackets, $360,000 of that belonged to the state and federal government, leaving him with only $840,000 to retire on – and THAT’s only if taxes don’t go up while he’s in retirement.

Is the 401(k) really an answer to America’s growing retirement crisis?  After all, 401(k)-type plans are a little less than 40 years old in this country, created when most people were accumulating assets.  They haven’t been around long enough to see what happens when the ‘baby-boom bubble’ begins to drain them.

More than a few experts believe it’s time to shake things up, as you’ll see in this video (there’s a very brief ad in front – it’s quick).  There’s also another video (scroll down below this one) I think you’ll find very interesting.

A recent article by Wealth Management Systems, writing for the FPA noted the following:

“Recent research indicated that a third of retirement plan participants were “not at all familiar” or “not that familiar” with the investment options offered by their employer’s plan. The study went on to reveal that individuals who were familiar with their retirement plan investments were nearly twice as likely to save 10% or more of their annual income, compared with those who report having little-to-no knowledge about such investments. Understanding your investment options is essential when building a portfolio that matches your risk tolerance and time horizon. Generally speaking, the shorter your time horizon, the more conservative you may want your investments to be, while a longer time horizon may enable you to take on slightly more risk.”

Here’s another one I think you’ll find very interesting.

The 401k Failure

How familiar with their options are 401(k) investors? Not very, apparently. Many now believe it’s time to move from a stock market-based system to something that’s insurance-based. While this may not be the right path for everyone, it certainly appears it is for most, as the following clips from FrontLine, 60-Minutes, and others.

According to The Power of Zero, by David McKnight (with a forward by Ed Slott, a CPA and well-known retirement expert, and a back cover endorsement by David Walker, former Comptroller General of the United States), an insurance-based approach makes far more sense, particularly if properly designed. And, there are a number of advantages.

The  insurance-based approach to funding retirement you saw in the video clips, does seem to have it’s benefits.

Indexed Universal Life:  A Life Insurance Retirement Plan is one 401k Alternative.
• No contribution limits
• No Pre-59-1/2 withdrawal penalties AND no mandatory distributions
• Tax Free Income at retirement
• Zero Loss From Market Crashes – with annual reset locking-in gains!
• Tax Free to heirs
• Self-funding option in case of disability
• Protection from market loss – You never lose money

It also doesn’t create taxation of Social Security benefits, provides protection from lawsuits in many states,  has no minimum age or income requirement, avoids probate, and – this is a big one – provides accurate return figures, an issue I’ve discussed in other writings.

There’s a lot more to this,of course.  If you’d like to visit with me about this, you can schedule your introductory phone call with me so I can gather some preliminary information.  Just let me know you’re interested in discussing an alternative to your 401(k).

Jim

Tips for Managing an Inheritance

6a017c332c5ecb970b01a73de5d743970d-320wi

Receiving an inheritance? 

Not sure how to manage it?

Before you make decision, it’s good to do your homework.  You might find our report on managing inheritance money helpful.  You can access it below.

Get Your Inheritance LifeGuide here!

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Visit the IFG Website!

Arrange a brief 15-minute introductory phone call with Jim Lorenzen, CFP®, AIF® here.

 

Follow Jim on Twitter: @jimlorenzen

and also Jim’s MoneyBlog

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Become an IFG client!  Schedule your 15-minute introductory phone call here!

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Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice.

The Independent Financial Group is a fee-only registered investment advisor with clients located across the U.S.  He is also licensed for insurance as an independent agent under California license 0C00742. Jim can be reached at 805.265.5416 or (from outside California) at 800.257.6659.

Interested in becoming an IFG client?  Why play phone-tag?  You can easily schedule your 15-minute introductory phone call!

The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.