You may have seen what is called the “risk pyramid,” rising from conservative fixed investments at the bottom to more aggressive growth vehicles at the top. Imagine that pyramid toppled on its side. You would have, at the left, the widest part—the fixed investments. At the right you would have the growth investments. This pyramid on its side is another way to visualize the time sequences in certain types of income planning.

How does it work? Reliable sources of income such as Social Security, perhaps a pension, and income from a job are calculated first. Then we put in the targeted growth rate, and we use conservative figures. Then we set up four to six segments, usually in five-year payout periods. The first bucket takes you to five years into retirement; the second takes you to ten years; and so on. This process supports the use of the Time Segment Model.

If this sounds like a good plan for your retirement needs, get in touch at www.familywealthadvisory.com for more information.

*ROI Reliability of Income is a registered trademark of Wealth2k, Inc. Used with permission.

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But how about first taking a good look at the picture on the cover of the box? Before you start working on the pieces, you need to have the big view. You should work with an advisor who will make sure you get the perspective you need so that your investment strategy makes sense for you and is designed to advance your goals.

Finding an advisor you can trust to give you direction, not just do what you ask, may result in a much more secure retirement future. Is your puzzle pieced together with the big picture in mind? Consider getting a second opinion on your current investment portfolio and schedule a free consultation at www.mysecondopiniontoday.com.

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The point being, if you would like to avoid feeling empty and disenchanted, you shouldn’t just wing it. Yet it seems that is how a lot of people approach retirement. They wait until they’re into it before they start planning. As a result, things may not work out as well as they would if they had addressed them earlier, and they can end up unhappy and disillusioned. They had grown weary of the daily race of their workaday life, but they may find retirement filled with new anxieties. They can’t seem to slow down.

By deciding your destination up front, you can set your own pace. You will know how much income you need to accomplish your goals and still live comfortably the rest of your days. The “Retirement Red Zone,” as Prudential calls it, should begin five years prior, and probably ten years if you are a business owner. Many people have an investment plan but no overall financial plan.

Visualize the lifestyle that you will find most satisfying and fulfilling. Give your life direction by setting goals so you can anticipate, plan and prepare. Focus on expectations. Start now; download a free chapter of my book DistributionLand (www.distributionland.com) for the strategies and risks to consider as you begin the journey.

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Converting is not that big of an issue, technically. It can be a big issue financially, however, because you face the prospect of paying those taxes in the year of conversion. Above all, however, the conversion has to make sense.

Consider this scenario:
For a married couple who want to convert to a Roth but who do not have the money to pay the taxes, one strategy may be to purchase a life insurance policy that we can use is a spousal Roth conversion.

Let’s say the husband and wife are both living, it’s the husband’s IRA account, and the couple does not need the money in the account. When it comes time to take the required minimum distributions, one option may be to purchase a life insurance policy on the husband in the amount projected to be necessary to pay the taxes upon his death so that his wife can convert the account to a tax-free Roth.

Let’s say that it would require $100,000 in taxes to convert a $400,000 account. When the husband dies, the wife inherits the $400,000, and she also receives a $100,000 death benefit. She could use the life insurance money to pay the taxes, and now she has a $400,000 Roth. That’s a way to accomplish a conversion without having to come up with the money right away.

Make sure you discuss with your financial advisor if converting to a Roth IRA makes sense for you and your family. This approach may not be right for everyone. Visit www.familywealthadvisory.com for more resources and advice on financial planning.

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But consider this: A great many of those who have perished on Mount Everest met their fate on the descent, not the ascent. A mountain climber needs an entirely different set of skills on the way down. Some people need a competent guide on both sides of the mountain—someone who has been there many times before and knows the terrain and conditions. Otherwise, a sudden change in the weather or the wind could do you in. 

Here are the potential enemies you could face in Distribution Land. Don’t let them surprise you on your retirement journey:

• Sequence of return risk. Read more about the Sequence of Return Risk in this article, “Watch Out for Sequence of Return Risk in Your Retirement Funds.pdf”

• Inflation and interest-rate risk. Read more about Inflation and interest-rate risk in this article, “Don’t Overlook This Big Retirement Risk.pdf”

• Bond market risk

• Tax issues

• Fees for probate

• Health-care and long-term care needs. Read more about Health-Care and Long-Term Care needs in this article, “Medical and Long-Term Care – An Underestimated Need You Can’t Afford to Ignore.pdf”

A financial advisor can create a strategy designed to help you come down the slope safely and inspire a sense of accomplishment. Learn more about these risks and the strategies for overcoming them in my book, DistributionLand .

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Everything that happens in people’s lives affects their finances. At Family Wealth Management, we use a program called Money Quotient that helps us get to people’s core values and beliefs and hopes for accomplishment. “Putting money in the context of life™” is Money Quotient’s motto.

The Money Quotient tolls can help with planning your immediate, short range, and long-term goals. We calculate how much those goals would cost, and we try to build an income plan that is designed to accommodate them. If you’re out to top the S&P 500, that’s not what a goal is.

As part of the process, we ask what you want in life. What’s important to you? If it’s a vacation each year with the kids and grandkids, we build that into your plan. If it’s an education scholarship to your alma mater, we set that aside. Whatever you wish to achieve, we calculate it into the target rate of return that would be needed to fulfill it. We won’t go after a 40 percent return just to beat some benchmark. Why would it matter?

When people don’t have a focus, they can wind up competing against financial benchmarks. But when they have a clear vision of their retirement goals, they can start planning to reach those goals instead. That’s why it’s important to start the planning at least five years before retirement, so you can lay the groundwork and begin building.

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For example, you decide to purchase $100 worth of XYZ each month for three months. In January, XYZ is worth $33, so you buy three shares. In February, XYZ is worth $25, so you buy four additional shares. Finally, in March, XYZ is worth $20, so you buy five shares. In total, you purchased 12 shares for an average price of approximately $25 each.

Now, in retirement,as shares go down in value, you have to sell more of them from your account to obtain the same income. It’s dollar-cost averaging in reverse. Think of it as dollar-cost ravaging. See our previous post concerning this.

The post How Dollar-Cost Averaging Changes in Retirement appeared first on Distribution Land.

Photo courtesy of Pixabay

For the most part, 401(k) plans have replaced pensions as the prevailing vehicle for people’s retirement. But surveys and studies show some very bleak numbers. The balances in 401(k)s and IRAs may not be nearly enough to pay for comfortable retirements, as the previous generation’s pensions once did. And today, few companies offer pensions.

Why is it possible that 401(k)s and IRAs may not provide as much retirement income as a pension? There are several reasons. First, not all companies offer 401(k) plans, just as some companies did not offer pensions. However, investors who do contribute to 401(k) plans often are unaware of the array of annual charges, such as administration fees, sales charges, management fees, and individual services that they are paying and that are siphoning away their earnings. Fees aren’t “hidden” so much as they’re judiciously disclosed. Many people simply don’t know how or where to look for those fees.

Fees, regardless of how conspicuously they’re disclosed, should be but one criterion you pick for your 401(k) investments. Look at asset class, management’s relative competence, and track record first. Each of them will have a far greater impact on your long-term returns than fees. If you aren’t sure what fees you are paying or how your 401(k) stacks up, seek out the advice of a professional. See how Family Wealth Management can help at www.familywealthadvisory.com.

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The First Step Cash Management system** can help ease some financial worries as it allows cash to flow into three accounts or “buckets.” Each of the three buckets holds a specific type of money, and each type of money has a specific use or purpose. This system aids in tracking your spending and knowing where your money is going.

1. The Static Account™ bucket holds money that has been spent or has agreed to be spent at some point in the past, such as mortgage, auto loans, credit card debt, insurance, and utilities.

2. The Control Account™ bucket contains money that will be spent within the next seven days. This account includes daily needs like groceries, pet care, clothing, etc.

3. The Dynamic Account™ bucket stores money that will be spent in the future on things such as charitable giving, debt reduction, vacation, and gifts.

For retirees who feel overwhelmed by the many decisions they face as they enter retirement, a bucket strategy similar to the envelope system that their parents may have used back in the day, may help them divide what they see as one large stress-inducing problem into smaller, more manageable pieces.

*Running Out of Money Worse Th an Death – by: Carole Fleck: AARP Bulletin, July 1, 2010
**First Step Cash Management is owned by Th e Planning Center Inc. and Distributed by Money Quotient, NP

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Imagine boarding a jet and heading to your seat, only to be told you are needed in the cockpit to fly the plane. That is what has happened in our workplace retirement system over the last 30 years. We have shifted from pension plans managed by professional financial pilots to 401(k) plans managed by passengers. You fuel the plane, you pilot the plane, and you land it. According to a 2014 research study conducted by the American College, 80% of respondents with nest eggs of at least $100,000 in assets, got an “F” on a test about managing retirement savings. It’s no surprise that many people are crashing.

In this post-pension era, you have to create your own cash flow. You have to take that pile and make it last for the rest of your life. Wondering how? Read up on retirement planning strategies. Start with a free chapter of Distribution Land (www.distributionland.com). You need to know some of the different ways to create an income stream so that you may feel more confident about your financial situation. And, you might consider adding the help of a professional co-pilot in a effort to land safely at your destination.

The post Welcome To Distribution Land, Time To Create Your Own Paycheck appeared first on Distribution Land.