Wealth Management Blog | WrapManager | Retirement Income Strategy (4)

What Military Strategy and 401K Inservice Withdrawals Have In Common

Posted by Seton McAndrews | CFP®, Vice President Investments

June 26, 2014

You don't have to wait until you retire to take advantage of a 401K rollover and all the benefits that come with it. A 401K inservice withdrawal can be just what you need to advance your retirement strategy and create new investment options.

In fact, it's not unlike a general gathering all of his troops together, examining the mission, and positioning everyone where they'll do the most good. Just as this wise general can be ready for whatever comes his way, a 401K inservice withdrawal can enhance your retirement income strategy while you're still working, thus preparing for a promising future.

401K Rollovers While You're Still Working

Many 401K plans allow you to rollover a portion (or all) of your 401K into your IRA while you're working without incurring any of the penalties associated with early withdrawals. Normally, if you're under the age of 59 1/2, a 401K withdrawal could be subject to a 10% early withdrawal penalty and be treated as ordinary income, thus raising income tax concerns. These penalties could take quite a significant bite out of your retirement savings.

Are Target Date Funds Hurting Your Retirement?

June 23, 2014

If you’re invested in target date funds, or your employer offers them as part of your 401(k) or another retirement plan, you may want to consider whether they are a good investment option for you. Target date funds are automated investment products that do not take into account your personal financial circumstances and needs, and they do not adapt to changing market conditions. As a result they may not be effective products for helping you reach your long-term retirement goals, and in some cases they could even add risk to your portfolio over time – hurting your retirement. Why Are Target Date Funds so Popular? The appeal of these funds is generally their “auto-pilot” feature – you pick a fund that matches your retirement date, and the fund will diversify your assets and gradually become more conservative as you near retirement.1 For this reason, some may perceive them as low risk investments, but there are issues with this view as you examine target date funds more closely. [+] Read More

A Retirement Income Strategy to Help Alleviate Your Retirement Worries

June 19, 2014

According to an April 2014 Gallup poll, 59% of Americans are concerned their nest egg is not big enough to last them through retirement. A majority (53%) is concerned about not having enough to pay medical costs in the event of a serious illness or accident, and (48%) wonder about their ability to maintain the same standard of living throughout retirement. Thankfully good retirement income planning can help alleviate these concerns, and even help prevent them from happening in the first place. [+] Read More

Are Your Social Security Retirement Benefits Taxable?

June 12, 2014

If you generate retirement income from non-Social Security sources, like an investment portfolio or rental properties, your Social Security retirement benefits are probably taxable. It’s important to keep this in mind as you work through retirement income planning with your financial advisor, so you can anticipate what the taxes are and how you should adapt your investment plan to account for them. Here’s a basic example of how it works: Let’s say you’re a married couple filing jointly, and your combined Social Security retirement benefits for 2013 were $10,000. You also received $25,000 in income from a pension, and withdrew $15,000 from your investment portfolio. To determine if your benefits may be taxable, simply take one-half of your Social Security retirement income amount, in this case $5,000, and add it to all your other sources of income: $5,000 + $25,000 + $15,000 = $45,000. If your income total exceeds $25,000 (single) or $32,000 (married filing jointly), which in this example it does, then part of your Social Security income is taxable. You would most likely have to file a return for your Social Security Benefits received on Form 1040 or 1040A.1 [+] Read More

Have Extra Retirement Income? 3 Smart Ways to Use It

April 26, 2014

Does your Required Minimum Distribution (RMD) exceed your living expenses this year? Or perhaps your income from rental properties, an investment portfolio, or a pension is generating extra cash flow beyond what you need. Here are three smart ways to keep those assets working for you: 1) Re-Invest Your Assets to Help Them Grow Get more out of your money by investing extra cash in your taxable brokerage account, IRA or other retirement accounts, which you can do if you meet certain requirements. (Your financial advisor can help you determine your eligibility.) If your extra income comes from RMDs, your financial advisor may be able to help you fulfill your required distribution by transferring stocks from your IRA into your taxable account. Instead of taking that money in cash, you can fulfill your RMD and stay invested in the market. Another option may be to transfer cash or stock to a qualified charity, in which case charitable giving rules may apply. [+] Read More

Managing Your Retirement Income: What to Do During Down Markets

April 22, 2014

When mapping out the sources and timing of your retirement income payments, there’s an important risk we want to make investors aware of: withdrawing money from your portfolio during down markets. If you’re not careful, withdrawing money while the market declines can significantly impact your portfolio and your ability to meet your long-term retirement goals. This risk is especially palpable if you’re in the early stages of retirement, because it can be difficult to replenish your portfolio over time. During down markets, investors should consider adjusting their withdrawal rates and exploring other sources of retirement income. [+] Read More

Managing Your Retirement: What are Your Retirement Income Sources?

April 14, 2014

JP Morgan research shows that on average, Americans age 65 and over will get two-thirds of their retirement income from Social Security and continued work/earnings. Surprisingly, only 11% of retirement income is expected to come from investment assets. For many high net worth investors, however, this number could be higher if they chose not to work or don’t have pensions or annuities. In reality, your sources of retirement income differ from other investors. Give yourself a better chance of maximizing your retirement income by knowing where it’s coming from and making sure your portfolio is structured accordingly.1 Source of Income at Retirement: Average for Age 65 and Older (Click chart for larger version) Source: EBRI (Employee Benefit Research Institute) Databook on Employee Benefits, Chapter 7. Data as of December 31, 2011. [+] Read More

Create Your Retirement Income Strategy with an Investment Plan

March 28, 2014

An investment plan can serve as a tool to help you create a calculated and dynamic retirement income strategy. Calculated because it takes into account important financial aspects of your life like cash flow needs, investment horizon, and risk tolerance. Dynamic because it can be adjusted as your family and financial needs change. Retirement Income Needs Shape Your Investment Plan Let’s say you are 65, in good health, and have $1,000,000 saved with a long-term goal of growth because you want to pass along assets to heirs. You’ll also need $1,000 of monthly income from the portfolio starting at age 70, to supplement Social Security retirement benefits. [+] Read More

3 Ways to Control Your Expenses in Retirement

March 25, 2014

The world’s largest asset manager, BlackRock,1 conducted a survey of 17,600 investors around the globe to uncover investor perspectives on retirement. BlackRock found that nearly half of respondents had a negative outlook on their financial futures, in large part because they were unsure if their retirement savings would outlast their retirement expenses.2 Do you feel this way too? Retirement is supposed to be enjoyed, not feared, and a solid investment plan can help wipe away those concerns. As a starting point, investors can think about ways to reduce retirement expenses to help allay concerns about having sufficient retirement savings. Here are three ideas to explore. [+] Read More

Selling Stocks to Generate Retirement Income? 3 Issues to Consider First

March 18, 2014

Many investors choose to sell shares of stocks in their portfolios every month, or perhaps every quarter, to raise the cash they need for retirement income. This isn’t necessarily a good or a bad method for generating retirement income, but there are three things investors should consider when taking this approach. 1) Tax Implications of Selling Stocks Investors should be mindful of realizing capital gains in their portfolios due to selling stocks. If the shares are being sold at a gain, it could mean having to foot a sizable tax bill the following year. These gains might be offset by selling stocks at a loss in the same year, but some investors may not have a lot of positions that carry a big loss—meaning you’ll be stuck with the tax bill. The current capital gains rate for investors filing jointly and making less than $457,600 is 15%, while anything above that threshold is taxed at 20%.1 [+] Read More