Retirement Income

What Are Required Minimum Distributions or RMD’s?

Required Minimum Distributions (RMDs) can feel like a complex and imposing topic, but they play an essential role in retirement planning. The rules surrounding RMDs are important for anyone with a tax-deferred retirement account, as understanding them can help you manage your income, reduce tax burdens, and ensure compliance with IRS regulations. This guide will help clarify what RMDs are, why they matter, and how you can navigate them effectively. What are Required Minimum Distributions (RMDs) RMDs are the minimum amounts that you must withdraw annually from your tax-deferred retirement accounts once you reach a certain age. These accounts include Traditional…
Read More

The Power of Assumptions in Retirement Planning: Why They Shape Your Financial Future

Retirement planning is not just about building a nest egg; it’s about creating a roadmap for how your finances will unfold over what may be decades of retirement. As with any long-term financial projection, this process is built on a foundation of assumptions. Which assumptions you use when planning your retirement will heavily influence which strategies shine and which may fail. Thus, being comfortable with these assumptions is crucial, as they will guide the financial strategies you’ll work with for the rest of your life.Let’s explore the key assumptions that form the bedrock of any retirement plan and the importance…
Read More

Navigating Variable Income Strategies in Retirement

Retirement income planning involves careful consideration of how to fund your lifestyle and future goals. Variable income strategies provide a flexible approach to withdrawing from a retirement portfolio by adjusting the amount withdrawn based on various factors like market performance, life expectancy, and portfolio sustainability. Unlike reliable income strategies, where income is drawn from sources like social security, pensions, or annuities, variable strategies seek to adapt over time to create a balance between spending and optimizing portfolio longevity.Nearly every retirement planner uses some variation of the strategies discussed here. However, there are many strategies out there, so I'll just be…
Read More

Understanding the Types of Retirement Projections

Financial Planning has a number of different tools available to provide analysis at different levels. In addition to the assumptions that are used within a plan, the method used to project your retirement income and expenses will heavily influence how outcomes are evaluated.There are three main types of retirement projections out there: Flat Average Projections Flat average projections use fixed assumptions for life expectancy, return rates, and inflation, applying them consistently throughout the retirement period. While this approach is straightforward, it does not account for variability in market returns or life events. For instance, if you assume a flat 5%…
Read More

How Insurance Works: The Law of Large Numbers

Insurance is a financial product that helps individuals and businesses protect themselves from financial losses. At its core, insurance works by pooling risks. By spreading the risk among many, the insurance company can provide financial protection to each individual without any one person bearing the full burden of a catastrophic loss.  The Law of Large Numbers The foundation of insurance is built on a key principle in statistics: the Law of Large Numbers. This law states that as the size of a group of insured people (the "pool") increases, the actual results will become more predictable and stable, aligning closely with the…
Read More

Retirement Income Strategies

When planning for retirement, choosing how to convert savings into income involves balancing certainty with flexibility. Broadly, retirement income strategies can be divided into two categories: Reliable Income Strategies and Variable Income Strategies. Each has its own advantages and considerations depending on personal risk tolerance, financial goals, and the need for predictable income.1. Reliable Income Strategies (Guaranteed)Reliable income strategies focus on creating income streams that are consistent and predictable, providing retirees with a "floor" of guaranteed income that typically lasts for life. These strategies are ideal for covering essential expenses, such as housing, healthcare, and daily living costs, since they…
Read More

The Original 4% Rule Explained

When it comes to planning for retirement income, you do not have to look very far in financial blogs and forums to find the 4% Rule and for good reason. The 4% Rule ushered in a new era of modeling techniques for financial planners to help people navigate what their retirement might look like in the future and how they can safely spend their accumulated resources over a long and uncertain timeframe.The 4% rule was developed by financial planner William Bengen in the early 1990s. Bengen's work, first published in 1994 in the Journal of Financial Planning, was a response…
Read More

How Social Security Benefits are Taxed

After years of hard work and seeing that large deduction from your income called FICA (or SECA if you're self employed), you've finally made it to begin collecting your Social Security benefits. The checks start rolling in but then you notice something when you file your taxes. Your Social Security benefits are taxable! Is that right? Unfortunately, yes. A lesser-known aspect to those yet to claim is their potential taxability. Understanding how Social Security benefits are taxed can help beneficiaries manage their finances more effectively and avoid unexpected tax liabilities. This article will delve into the specifics of Social Security taxation, including…
Read More

The Future of Social Security

Social Security benefits are one of the key sources of retirement income for most Americans so it can be quite disturbing to reach news headlines like:"Americans will lose full Social Security benefits in 11 years" - Business Insider"Social Security benefits may be cut by at least 20% in the next decade" - CNBCWhether you're currently claiming Social Security, are within striking distance of claiming, or have a few decades or more (that's me 🙋‍♂️) before claiming, it is important to understand what is happening with Social Security, why the alarm bells are being raised, what can be done about it,…
Read More

Unraveling the Numbers: A Comprehensive Guide to Social Security Benefit Calculation

Social Security benefits are one of the cornerstones of anyone looking to retire in the US. A retiree's Social Security benefit provides them with a monthly stream of income that adjusts each year for inflation and lasts for as long as they live. While the actual formula used is complex and beyond the scope of this article, understanding the major components of the calculation will help maximize your Social Security benefits over your lifetime. Key Ideas Delaying Your Benefits Increases Your Monthly Amount Reviewing Your Earnings Record to Catch Mistakes Early Filling Your Top 35 Years Increases Your Benefits Understand…
Read More