Income planning for retirement sounds intuitive. Yet many Americans go without a solid plan.
One-third of Americans have no plan of any kind, and only one-third of Americans who do plan have more than 100,000 dollars saved.

If you haven’t, you should start making monthly retirement savings. But don’t just set some money aside in a bank account.

Get a detailed plan in place. Consider your various options to save money so you can spend decades in retirement. Here is your quick guide.

A Plan for Retirement

You should set a goal for when and how you want to retire. Many people want to work beyond 65, the standard retirement age.

If you’re comfortable doing that, you should. This will give you more time to save money and decide what you want to do after you leave work.

To start planning for retirement, you should look into what employer-sponsored plans you can place your money into. A 401(k) account is the most common option.

But you also choose a 403(b) or 457(b) plan. A 403(b) plan is for employees of tax-exempt organizations, with employers matching their employee’s contributions. A 457(b) plan is for local and state government employees, and it involves contributions taken from pre-tax income.

Start saving money as soon as you can. One common fear that people have is outliving their savings. By saving money early on, you can ensure that you will have resources well into your nineties.

Diversify your investment portfolio. Combine your employer-sponsored plan with IRAs and brokerage accounts. You can maintain some hard assets, but make sure you also have cash in savings accounts.

There is no set rule for how much of your income you should save every year. Talk to your financial advisor about what seems reasonable.

In general, you want to have your retirement income at 80 percent of your pre-retirement salary. If you make 80,000 dollars a year, you want to have 64,000 in retirement. If you plan on traveling or moving abroad, you should have even more money.

Try putting aside 20 percent of your post-tax paycheck into retirement savings. Adjust as you make more money and investments.

Indexed Annuity

An indexed annuity is an annuity that is tied to a stock index. It is distinct from a fixed annuity, which has a constant and unchanging interest rate. The interest rate of an indexed annuity goes up and down depending on stock performance.

This means that an annuity provides more money when times are good. Even when times are bad, an indexed annuity allows for more savings than a variable annuity.

Index annuities do have a guaranteed minimum return. Your contract will specify a certain amount of your principal that you will get back. To determine the interest, you can select several different types of indexed annuities.

An annual reset package looks at the change in the stock index from January to December. It ignores declines, providing interest based on overall increases.

A high watermark annuity examines the stock values at various points in the year. It takes the highest value, then compares it to the one when the annuity contract started. The increase in values determines the interest rate.

A point-to-point annuity is similar to a high watermark one. It examines the change at two preselected points in time, which could be over several years. Most contracts have a term, so a point-to-point annuity will use the start and end of the term.

Index averaging looks at the value of the index every day or month, then average certain values together.

Many people are worried about outliving their income. An indexed annuity provides a protected monthly income, which decreases the risk of outliving.

Social Security

Another resource at your disposal for income planning is Social Security. You can qualify for Social Security at 62. This makes it a desirable source of income for people who want to leave work a little early.

But you need to be strategic with Social Security. If you retire later, you can receive more benefits.

You pay taxes into Social Security while you work. According to the Social Security Administration (SSA), beneficiaries receive 40 percent of their pre-retirement income. This is a good foundation to build upon, but it is not enough for many Americans to retire.

Keep in mind your Social Security payments while you are planning for retirement. But don’t weaken your portfolio or employer-sponsored account. Save up the majority of your money through those programs, then use Social Security as a safety net.

You can use your Social Security money for anything you’d like. If you’re comfortable, consider making investments with the funds. This will give you opportunities to earn money while you are retired.

You can only qualify for Social Security once you’ve earned 40 credits. You can earn up to four per year. You earn one credit for 1,470 dollars in earnings.

If you become disabled and unable to work, you can use your benefits. But the SSA only grants disability benefits under rare circumstances. You should incorporate contingencies into any financial plans you make.

Get Smart When Income Planning for Retirement

Income planning for retirement is straightforward yet profound. Think of when you want to retire, then find a good employer-sponsored account. Put some money into that account and different investments.

An indexed annuity can give you savings over a long period of time. Consider your different options to guarantee yourself a monthly income.

Leverage your Social Security payments. Use them to make investments while you are retired. Weigh the options of retiring early or working later.

Work with experts on securing a stable retirement. Contact us today.

Does the thought of retiring make you nervous or excited? If you have a strong income plan, retirement can be one of the most exciting and moments of your life.

You can retire with the knowledge that you will be able to continue living your life the way you want to live it. If you don’t start income planning, however, retirement can be downright scary.

Developing an income plan for retirement starts with understanding the different income streams available to retirees. You’ll have to get familiar with terms like indexed annuities, guaranteed income, and many more financial terms that can serve you well when you’re done working.

The better you understand your options for retirement income, the easier it will be to plan for your future.

In the article below, you can learn all about the different options available to you in terms of retirement income. You’ll also learn how to start saving now so that you’ll be set up for a long, relaxing retirement. Read on to make sure you’re ready to retire comfortably when the time comes.

What are Indexed Annuities?

One of the best ways to ensure you’ll have a comfortable life as a retiree is to purchase an indexed annuity as soon as possible. This is a contract between you and an annuity provider that works similarly to insurance.

You’ll give the provider a one-time payment, monthly payments, or annual payments in exchange for a contract that promises to provide you with regular payments when you reach retirement age.

With indexed annuities, the amount of these retirement payments depends on the performance of certain index funds. The S&P 500 and Wilshire 5000 Total Market Index are good examples of the types of index funds that are generally used for indexed annuities to provide guaranteed income.

Purchasing an indexed annuity contract now will set you up for regular income to use when you’re retired.

How Can You Get Access to Tax-Free Income?

The taxes that you pay while you’re working can take a lot of money out of every paycheck. That’s why many people want to know how to avoid paying taxes on the income they get when they’re retired. One option for tax-free income is a Roth IRA.

If you start contributing to a Roth IRA when you’re young, you’ll have plenty of time to let the money grow as the IRA investments increase in value. No matter how much your Roth IRA grows as a result of investments, the extra money in the account won’t be taxed.

Plus, you can take the money out of the Roth IRA when you do retire and it won’t be taxed then either. The only time this money is taxed is when you first receive it as income; before you ever put it into a Roth IRA. You’ll also have to pay taxes on this money if you pull it out of the Roth IRA before you reach retirement age.

How Do Social Security Payments Work?

For however long you’ve been working in the United States, you’ve been giving part of your paycheck to Social Security. When you retire, you can finally get some of that money back in the form of social security payments. How much you get paid from social security depends on how much you made during your life and what age you are when you retire.

If you’re planning to rely heavily on Social Security in retirement, you should know your full retirement age.

If you choose to retire at age 62 and you have not yet reached your full retirement age, you will not receive your full social security payments each month. However, if you choose to delay your retirement by a few years, you can actually receive a larger social security check each month than you would have if you’d retired at your full retirement age.

When Should You Start Planning for Retirement?

When it comes to financial planning for retirement, you should start as early in life as possible. However, it’s never too late to start looking at your options for retirement income. If you do a little bit of income planning today, you can rest easy in the future knowing that you’ve already taken care of your retirement income streams.

Why is it important to start saving for retirement early on in life? It’s important because of compound interest. As your money grows in a retirement account, the previous year’s gains of the previous year can grow on top of the money you initially put in the account. The more years you have between your initial savings deposit and your retirement date, the more compound interest will impact your account.

Start Income Planning Today and Enjoy Your Retirement

The more you plan for retirement today, the easier it will be to relax when the day comes that you finally do retire. People who do a lot of income planning before retirement can also retire earlier than people who don’t.

Instead of having to work longer and save more for retirement, people who are smart about income planning can stop working once they reach retirement age. If you’re interested in learning more about income planning and retirement, get in touch with our retirement planning experts.

Considering retirement? Most people fear the very real possibility of outliving the money they’ve worked so hard to save.

Making sure your money lasts throughout your life is one of the main concerns when planning retirement. After all, you worked hard and saved your entire life. You shouldn’t have to worry about reducing your lifestyle.

Keeping your retirement properly funded remains an ongoing challenge. This holds true with the market volatility, economic uncertainty, and other concerns. On top of that, we’re living longer than we used to.

Pension Plans

Company pension plans provide a steady income for life countered some of those risks. But, only a few are lucky to have one.

Today, pensions are disappearing from the American landscape. Only 26% of American workers have access to a defined-benefit pension plan, according to a Bureau of Labor Statistics survey in 2018.

How Annuities Give You Protected Monthly Income

But, there’s some good news. Even with the risks, concerns, and in the absence of a pension, you can get that kind of protected monthly income. You can get it by investing in an annuity.

“An annuity is the only financial product that can generate income that will last as long as someone may live, whether that is to age 80, 90, 100, or 110,” explains Frank O’Connor, vice president of research and outreach at the Insured Retirement Institute.

Annuities are long-term investments offered by insurance companies. They can provide this lifetime guarantee because they’re able to pool the risk among a wide range of individuals.

<h2″>Other Annuity Benefits

“Setting aside part of your retirement savings into an annuity also helps you avoid a second issue associated with working with lump-sum investments,” says William G. Gale at the Brookings Institution think tank in Washington, D.C. He serves as the Arjay and Frances Miller Chair in Federal Economic Policy and Director of the Retirement Security Project.

Gale says, “If you drawdown your lump-sum savings too and live longer than you expected, you might have to rely on less in your later years.” Keep in mind, if you also drawdown your savings and pass away earlier than you expected, your thrift will have been unnecessary. You won’t have enjoyed your retirement years as much as you could have.

“Having part of your retirement assets in an annuity reduces these two risks,” Gale says. You can have a standard of living that’s higher than in the conservative drawdown case and rest assured your protected lifetime income will last as long as you do.

O’Connor believes that the temptation to overspend is greater when you see your savings as a lump sum. “Retirement savings will seem like a financial windfall at first,” says O’Connor. He states “using that ‘pot of gold’ without a plan creates a high likelihood of depleting those savings while you still need them.”

How to Plan Ahead with an Annuity

Annuities can also protect you from outliving your income in retirement. It decreases your need to make financial decisions late in life. “We’re all vulnerable to the challenges of old age,” says Jack Dolan, vice president of the American Council of Life Insurers.

Remember—not all annuities are alike. For example, some annuities provide a family benefit, beyond one person’s life. This could be a joint benefit or a death benefit.

Plus, your need for an annuity also depends on your other sources of retirement income, like Social Security or required minimum distributions from retirement plans. So check with a financial professional before investing in an annuity.

Ultimate Retirement Planning Goal

Whatever your asset mix is, all retirement planning comes down to one thing: being more secure. The protected lifetime income of an annuity can free you to focus less on financial concerns and more on enjoying your golden years to the fullest.

Important info

Annuities are long-term investments designed for retirement purposes. The value of variable annuities is subject to market risk and will fluctuate. Product guarantees are subject to the claims-paying ability of the issuing insurance company.

Earnings, when withdrawn, are subject to federal and/or state income tax, including a 10% tax penalty for withdrawals before age 59½. Some income guarantees offered with annuities take the form of optional riders and carry charges in addition to the fees and charges associated with annuity products.

There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Investments in annuity contracts may not be suitable for all investors.

© 2021 Alliance For Lifetime Income. All rights reserved.

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The 2021 tax season is now here and Americans are excited to maximize their refund. Last year, the average tax refund was nearly $3,000.

Due to the Covid-19 pandemic, Congress passed additional tax relief legislation to help American families. There were major changes in 2021 including popular provisions like the Child Tax Credit (CTC).

Many married couples face a predicament about whether to file separately or jointly. Read on to learn whether you and your spouse should file taxes jointly. Explore the pros and cons so that you can make an informed decision about filing taxes.

What Do the Tax Brackets Look Like?

When debating to file taxes separately or jointly, the first question to answer is what are the different tax brackets? The Internal Revenue Service (IRS) publishes tax brackets for each filing category before returns are accepted.

This way, tax filers have adequate time to prepare and have insight on how much to withhold from their pay. Continue reading for a breakout of the tax brackets for married vs single:

Single and Married Filing Separately

For the most part, the tax brackets for single and married filing separately are the same. There is only one difference in the tax brackets between the two filing categories.

Those earning $10,275 or less pay 10% taxes in both filing categories. The same is true for the 24%, 32%, and 35% tax brackets. The income thresholds for these brackets are $89,075, $170,050, and $215,950 respectively.

The only observed difference is in the 37% tax bracket. Single filers who earn $539,900 or more pay this tax rate.

For married filing separately, the income figure drops down to $323,925. This is often referred to as the marriage penalty. A person earning $400,000 pays higher taxes if married than if he or she remained single.

Married Filing Jointly

Now, it is time to discuss the tax brackets for married filing jointly. The relationship between married filing jointly vs. separately is simple. Typically, the income thresholds double from the single or married filing separately category.

Of note, the income threshold for single filers in the 37% tax bracket does not double. In this case, it only doubles from the married filing separately figure.

Bottom Line

At first glance, there is not much difference in the tax brackets for married filing separately vs. jointly. The income levels are simply doubled for joint filers.

There may be unique situations where a couple wants to ensure that one spouse’s income falls below a certain threshold. Perhaps they claim all the deductions and tax credits to achieve a desired rate. However, these cases are rare and require a tax professional to crunch the numbers.

What Is the Standard Deduction?

The standard deduction is a mechanism used in tax filings to reduce your taxable income. While many people itemize their deductions, the vast majority claim a standard deduction.

The Trump Administration’s Tax Cuts and Jobs Act doubled the standard deduction to increase its popularity and usage. In fact,90% of Americans now claim the standard deduction on their tax returns.

The standard deduction varies depending on your filing status. For married couples filing separately, the standard deduction is $12,950. This figure doubles to $25,900 for those who are married filing jointly.

Again, the bottom line is that married filing jointly does not benefit you for the standard deduction. Each spouse is going to receive the same share of the standard deduction regardless of your filing category.

What about Tax Deductions and Credits?

Tax deductions and credits is where married couples filing jointly finally get ahead. The IRS does not allow married couples filing separately to claim a number of popular deductions and credits.

The Earned Income Tax Credit (EITC) is one of the big losses for separate filers. Married couples filing separately are not allowed to claim EITC.

Students and recently-graduated filers are also at a disadvantage if they do not file jointly. Married couples filing separately are not permitted to claim the student loan interest deduction.

They also lose access to the American Opportunity Credit and the Lifetime Learning Credit. These are two popular programs designed to help Americans pay for their education expenses. Barring a few exceptions, separate filers cannot claim adoption or dependent care tax assistance as well.

An additional benefit for married couples filing jointly is Roth IRA contributions. Joint filers can contribute to a Roth IRA up to $214,000.

This is not true for single filers. Only filers with an income less than $10,000 are able to contribute to a Roth IRA.

Are There Cases Where Filing Separately Is Better?

There are instances in which filing separately maximizes your total tax refund. One common situation involves deducting medical bills. The IRS allows tax filers to deduct medical bills that surpass 7.5% of your adjusted gross income.

If you file jointly, this 7.5% threshold is more difficult to reach. This is especially true if your spouse was in good health and did not see a doctor often. Another contributing factor is if your spouse has significant income and makes it harder to reach 7.5% of AGI.

Student loans are another reason why you may not file jointly. Ironically enough, we listed losing the student loan interest deduction as fallout of filing separately.

However, many Americans are on income-based repayment plans. If you add your spouse’s income to your tax status, it may increase your monthly student loan payment.

There are a few other reasons why a spouse may not want to file jointly. For instance, one example is if their spouse has made tax errors in the past and owes back taxes. The other spouse may not want to expose their assets to seizure.

Should You and Your Spouse File Taxes Jointly or Separately?

The answer to this question really depends on your financial situation. Each couple has different circumstances and should make the decision that benefits them the most.

The best solution is to run your taxes both ways and see which one yields the lowest tax. If you enjoyed this article about whether you should file taxes jointly, check out our blog for more great financial advice.

Did you know 64% of Americans aren’t prepared for retirement? Fortunately, over 53% have at least some retirement planning in order.

We’re here to help bridge that gap. With our easy retirement plan checklist, you can find out what you still need before you’re ready to retire.

So ensure you’re on course for a healthy, luxurious retirement by checking these boxes.

1. Build a Solid Financial Foundation

A proper retirement financial guide is incomplete without ensuring you have a solid foundation in place.

First, pay off all debt, except for perhaps your mortgage, depending on how close you are to retirement. Start by paying off payday loans, credit card debt, and car loans. The less debt you have in retirement, the more spending money in your budget.

Make sure you have an emergency fund in place, so as surprise expenses come up, you don’t need to turn to debt to cover your bills. This should be anywhere from $1000 minimum up to 6 months worth of expenses.

Finally, make sure you’re keeping a budget. It will help you stay in control of your finances, and will give you an idea of the lifestyle you can afford in retirement.

2. Max Out Your Retirement Contributions

While it’s always best to start young when it comes to your retirement planning, it’s never too late. Within your budget, max out your retirement contributions.

If your employer offers a 401(k) match, make sure you’re at least investing enough to meet the full extent of the match—hey, it’s free money!

Other retirement accounts have various limits on how much you can save each year. Make sure you do your best to hit these numbers.

3. Save with an HSA

An HSA, or health saving account, lets you set aside money with great tax savings to pay for health expenses at later points. There are rules on who can and can’t qualify for an HSA, but reach out to us, and we’ll help you find what you’re eligible for.

4. Consider Life Insurance

Life insurance is there to take care of your family after you pass on, and it can be anywhere from funeral expenses to a significant sum. We talk about the pros and cons of various life insurance policies here.

While it may seem like an unnecessary expense, consider it “I love you money” and enjoy the peace that comes with knowing your family is protected.

5. Invest in Your Health

Finally, you need to invest in your health. What’s the point in being wealthy in retirement if you can’t enjoy it?

So cut back on stress, eat more vegetables, cut back on processed foods, and exercise more. Cultivate healthy, lasting relationships throughout your entire life.

A Retirement Plan Checklist Is the First Step to a Happy Retirement

Retirement planning sounds scary, but with our simple retirement plan checklist, it doesn’t have to be. These tips ensure your health, family, and living expenses will all be taken care of, so you can enjoy your retirement worry-free.

Ready for a comprehensive, personalized plan? That’s our specialty. Contact us today.