Retirement Income

Understanding Benefit Base vs. Cash Value in an Annuity

Annuities are a staple in retirement planning, offering a mix of benefits that can provide peace of mind in the later stages of life. However, navigating the components of an annuity, particularly the distinction between the benefit base and the cash value, can be confusing. To simplify this, let's explore these concepts using a relatable analogy: a store coupon. The Benefit Base: Your Special Store CouponImagine you receive a coupon from your favorite store. This coupon is not cash; it has no value outside the store. It’s only useful for getting a discount on a future purchase or redeeming a…
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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…
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The Basic Types of Annuities

Annuities are contracts with an insurance company that provide certain benefits. There are many types of annuities out there and the terminology and usage can be confusing. This article provides and overview of the basic types of annuities and their variations. Quick Annuity Primer Base Contract: Every annuity starts with a base contract. The base contract has certain guarantees embedded it such as minimum interest rates, annuitization factors, fees, surrender charges, how the cash value can be invested. Riders: Some annuities have the option to add riders. Riders are additional features that can be added to the base contract to provide additional…
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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…
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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,…
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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…
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