Retirement Income Planning. Income Power.

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Give your retirement income a boost, and reduce your chances for a bust.

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Who doesn't want more income in retirement - to meet essentials, to pay for travel, to give to kids, and more. We'd all like an Income Boost. However, most retirement plans ask you to take more risk with your investments - and so your boost may become a bust. Now, the new Income Allocation method can deliver more income while reducing investment risk.

What is the Income Allocation planning method?

How much of an Income Boost can I get from Income Allocation?

Why does asset allocation planning fail to produce enough retirement income?

What is the least understood and potentially most dangerous retirement risk of all?

How can certain retirement vehicles increase income and eliminate investment risks?

What is the Income Allocation planning method?

The twin goals of the Income Allocation Planning (IAP) method are to increase the amount of after-tax (spendable) income and to reduce income volatility (for more dependability). IAP does this by creating more safe income not dependent on market returns.

The following three steps distinguish IAP from retirement planning strategies that rely solely on asset allocation.

Step 1. Allocate income around dividends, interest, annuity payments and withdrawals. Attempt to minimize or eliminate withdrawals after age 85 and use income annuities to provide guaranteed lifetime annuity payments.

Step 2. Treat rollover IRA accounts differently than personal (after-tax) savings accounts for optimal tax efficiency. And manage the equity portion of portfolio accordingly.

Step 3. Manage withdrawals from Rollover IRA rather than simply taking the IRS required minimum distributions. Manage withdrawals to create increasing, predictable cash flow.

How much of an Income Boost can I get from Income Allocation?

The advantages of IAP come from financial vehicles that generate the highest amount of dependable, spendable income. The greater allocation to dependable income continues for the retiree's life, with withdrawals from savings eliminated or minimized by age 85 - what should be the retiree's worry-free age.

Most everyone we know would like to generate more income in retirement - to meet essentials, to pay for travel, to give to kids, to pay for a caregiver, etc. They'd all like an Income Boost. However, most retirement calculators require you to take more risk with your investments - and so your boost may become a bust.

Now, the Income Allocation Planning method offers you more income while reducing investment risk. To find out your Income Boost, fill in the input fields on the calculator on this page.

Why does asset allocation planning fail to produce enough retirement income?

The asset allocation method involves drawing down savings over time from a portfolio of stocks, bonds and cash. Unfortunately, this planning method leaves retirees with all of the risks: investment, longevity, dependency, and persistency (see below). Further, investors like retirees may underestimate their longevity and overestimate their money management skills.

Much of the prior generation of retirees could rely on pensions. Risks were pooled among many participants and also were professional managed. While pension plans can't avoid market risk, they had the benefit of spreading, say, longevity risk across a very large group. And most were backstopped by the Pension Benefit Guarantee System. The 401(k) generation now must create its own backstop.

What is the least understood and potentially most dangerous risk of all?

Persistency is about carrying out the retirement plan selected. That discipline is virtually impossible when the retirees faces a stark choice: withdrawal savings after a major market correction or make painful/unrealistic cuts in personal spending. And failure to stay the course, based on various studies, results in a reduction of 1% to 4% in returns the individual investor earned vs. what the overall market earned.

We measure that risk by the percentage of income that is safe - or not tied to market returns, and riskier income that is based on the market. The higher the percentage of riskier income the more likely investors will underperform the market. An Income Allocation Plan significantly reduces riskier income, while at the same time generating a large income boost to your retirement.

How can certain retirement vehicles increase income and eliminate investment risks?

What if you were able to eliminate all risks in investing by assuming one new risk? What if your income from this financial vehicle would not be subject to duration, market, reinvestment or timing risks. And what if this financial vehicle would pay up to 3% or more income. What is the vehicle, and what is the remaining risk?

The vehicle is an Income Annuity that pays investors up to 3% more than its interest earnings -- and does it for life. An Income Annuity is an insurance product that takes a lump sum of money and turns it into a guaranteed stream of income for the rest of your life. (Depending on the type of Income Annuity, it could pay out until the death of a spouse). Payments can begin immediately, or they can be deferred to build up higher amounts of income for later in life.

You can learn about the different types of Income Annuities in this site.

WHAT is a Deferred Income Annuity (DIA)?

During the deferral period, you have limited access to the DIA's value. Only you can determine whether a Deferred Income Annuity is right for you and your situation, particularly since you have to consider the return on savings you may be giving up during the deferral period.

There are special tax benefits for QLAC contracts - a special type of DIA - obtained by transferring funds from an IRA, 401(k) and/or other qualified plan savings. There are also limits under such contracts. If you'd like to learn more about QLAC go to QLAC Shortcut.

What are the specific benefits of a DIA?

Safety and Stability: The income amounts are guaranteed by the life insurance company, and results are not subject to any fluctuations in the financial markets. The Guaranteed Income provides stability in relation to other sources of income.

Wealth Preservation: By deferring income until your life expectancy and beyond, you can help cover late-in-retirement expenses, such as:

1. Basic needs if you run through your savings due to overspending, bad markets, bad luck, and/or unanticipated medical and long term care expenses

2. Long-term care insurance and/or life insurance premiums, keeping these policies in force when they may be needed most

3. Real estate taxes or mortgage payments to help you stay in your home

4. Any annual gifting program that is helping reduce your estate taxes

5. Just-for-fun expenses such as a cruise, upgrade to business class, or any other way that helps bring you joy.

IRA/Qualified

These retirement accounts represent the clearest form of retirement savings.

As a replacement for the corporate pension they are the most logical source for retirement income. Further their tax treatment is geared to delivering the highest level of income during your lifetime rather than a legacy to your family.

In measuring your Income Power, we suggest including at 100%.

Purchase of QLAC and Current Income Annuity may be made through tax-free rollover.

Personal Savings

These savings and investment accounts represent the accumulation of after - tax savings. Investment returns on these amounts are taxed currently, some at favorable rates; amounts left as a legacy may receive favorable tax treatment at your passing.

In measuring your Income Power, we suggest excluding those amounts generating yields and considered part of your legacy.

Purchase of DIA and Current Income Annuity may be made only on an after tax basis. Portion of these annuity payments will be considered as tax-free return of principal.

Deferred Annuities

These annuities, unlike those described in the Go2Income site, are designed to accumulate savings on a tax-deferred basis. They may offer variable, indexed or fixed returns. Unlike the IRA/401(k) they offer tax deferral beyond age 70 ½. If amounts are withdrawn they will be taxed on a least favorable last-in,last-out basis.

In measuring your Income Power, we suggest including at 100%.

Purchase of DIA and Current Income Annuity may be made through tax-free exchange.

Primary Residence

Investors may tap the equity in your house through a Home Equity Conversion Mortgage (HECM). This mortgage is subject to a rigorous financial assessment but it can be a source of tax-free cash during the early stage of retirement. To maintain liquidity and legacy we suggest using in moderation.

In measuring your Income Power, we suggest including at 40%, but not more than $250,000.

Purchase of any form of annuity from these proceeds and is strictly prohibited.