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Factors That Can Reduce Retirement Income

There are many different factors that can reduce retirement income. The first may be fairly obvious, but it’s the effect of death. For two spouses when there’s a pension involved, the death of a spouse could mean the loss of a pension income. Now if there’s a survivor benefit, that income may continue, so it’s important to evaluate your options when making pension decisions. A lot of people use insurance to protect against this type of income loss. Another way death can reduce retirement income has to do with Social Security. When two spouses are receiving Social Security and one spouse passes there will be a loss of one of the benefits. Now, the surviving spouse will receive the higher of the two benefits, but there still will be some loss of income. The final way that death can reduce retirement income has to do with taxes. Moving from married filing jointly to now filing single can push the survivor into a higher income tax brackets. The reason for this is that the income thresholds for married filers is about twice what it is for single filers. This can have a major impact on the surviving spouse’s net after tax income in retirement.

Taxes in general is another area that a lot of people overlook when it comes to retirement income. The reality is that taxes will take much more from you than the market ever can. For instance, going back to 2008 during the Great Recession, the average portfolio might have declined 20 to 30 percent, assuming it was well diversified, of course. That might have taken a couple of years to recover, but taxes in retirement can easily cost anywhere from 30 to 40 percent. And that’s money that will never come back. So it’s really important to consider where your different sources of income are coming from in retirement. Would it all come from pensions, Social Security, IRAs, 401(k)s, sources that will be taxed at ordinary income rates? Or do you have good tax diversification where you can choose from pulling money from maybe a Roth IRA raise or non-qualified accounts and really get a lot of control over your taxes in retirement? And finally, inflation. Inflation is absolutely something that can reduce your income in retirement. And it does this by reducing the purchasing power of your dollar in retirement.

Inflation isn’t just something that happened in the past – things will continue to cost more in the future. So let’s look back 30 years. 30 years is about the average timeframe for most people in retirement. So in 1989, the average cost of a first class postage stamp was twenty five cents. Today that same stamp will cost you fifty five cents. Also in 1989 the average cost of a new car was $15,000. Today the price of a new car will set you back on average $37,000. So you need to look at how well your different sources of income will keep up with inflation during retirement. For help optimizing your retirement income, visit us at .

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What Are the Best Self-Employed Retirement Plans?

We often get the question asking us, “what’s the best retirement plan if I’m self-employed?” Well, that’s hard to say. There’s lots of plans out there, and the best one depends on your situation, right? Do you have employees or is it just you? How old are your employees? What are their salaries? So just to simplify, I’m just going to assume that – one person, self-employed, maybe their spouse is involved in the business, but that’s it, no employees. in that case, you might want to look into something called a solo 401(k) or an individual 401(k). It’s really simple to set up, not really a lot of cost to maintain, but it gives you a great amount of flexibility. As a self-employed person you’re the employee and the employer. And with a solo 401(k), you can make an employee contribution, as well as a profit sharing or a matching contribution on behalf of the business – again, because you’re also the employer. It’s straightforward, like I said, easy to set up, and gives you a pretty large amount of flexibility. If we’re talking about larger plans, and something that’s going to give you an even greater tax benefit, you might want to look into something called a defined benefit plan.

This is a little bit more costly to establish. There are some filing requirements, there are minimum annual funding requirements, but if you’re making a fair amount of money and you’re looking to put away really large sums of money, a defined benefit plan can be the way to go. You can put hundreds of thousands of dollars a year away into a plan like this. You could also pair that with a solo 401(k) to give yourself even greater flexibility. So like I said, while there’s not one end all be all plan that’s perfect or the right one, it’s going to depend on your actual situation.

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How to Retire Solo & Smart: Retirement Planning for Single Millennials, Gen-X, and Baby Boomers

hello as well as welcome I'' m Catherine Bowie from Pure monetary experts and also thanks for joining us for this webinar on navigating retirement solo with Allison street cfp expert Allison how are you I'' m excellent Catherine exactly how are you I'' m doing really well and thank you for doing this for us naturally well let'' s get involved in navigating a solo retired life okay we ' re going to speak about a couple of points today but firstly honestly whether you'' re single or not right preparation for retirement um is crucial right as well as do you recognize what you would do if you were trying to build your wide range alone even more people than effort more individuals than ever are browsing reaching retirement on their own so let'' s talk regarding what that entails first points initially exactly how do you plan to invest your retired life right you have to look as well as say do I have sufficient cost savings is and after that is your intend on track currently 56 of single employees are certain that they'' re going to have the ability to retire easily have you thought of when to collect your Social Protection did you keep in mind that you could need to pay for Private healthcare insurance coverage right even if you get to Medicare age there'' s typically extra prices related to that have you constructed that right into your preparation to get you all set for retirement um the the numbers are actually quite quite shocking however a solitary retired person might pay anywhere near to two hundred thousand bucks over three years in retirement for health care expenses right so it can be a huge expenditure if you aren'' t all set for it and have you considered your emergency funds and your estate planning right all aspects that factor into preparing for retirement fifty percent of U.S adults are actually solitary I believe that'' s possibly more than a whole lot of individuals understand so there'' s a whole lot of individuals available preparing for retired life on their own and that can have an effect on your capacity to do away with money for retired life sixty percent of people that have actually never ever been wed really have no retired life financial savings in all or any financial savings um 35 of individuals that have actually been wed at the very least as soon as have no savings so they'' re a little much better off right that'' s still a a great deal of people without cost savings but right people that have actually never ever been married there'' s a bigger percentage of those so it'' s something to really desire to you really intend to element in let'' s discuss pension right given the failure to conserve it'' s not that unexpected that a great deal of individuals aren ' t on training course for retirement when we consider the different Generations right we'' re mosting likely to damage things down by Millennials Gen X and Infant Boomers as well as we look at the ownership prices by generation 50 of Millennials have retirement accounts a little much better the bit older you get 56 of Gen X currently ages 43 to 58 I need to state Millennials are presently 27 to 42.56 percent of Gen X has pension as well as a bit better a little older Child Boomers currently age 59 to 77 58 of child boomers have pension so individuals are making a bit much more proceed the older they get which is good yet the earlier the far better and we'' re going to speak about some methods for that when we look at average account equilibriums by ages individuals presently 65 plus the typical retired life account equilibrium is approximately 87 000. ages 56 to 64.For 2023 30 000 is the optimum 401k payment amount Roth Ira'' s traditional Individual retirement accounts also have an added catsup amount included so once again that base payment quantity is 6 500 yet if you'' re over 50 or over you can include an added thousand with Roth IRAs as well as traditional Individual retirement accounts there are Income limitations involved so you want to check what you'' re eligible for but if you ' re eligible and 50 and also up 7 500 for 2023 is what you can place aside right into a Roth or a traditional Individual retirement account in enhancement you actually want to pay attention to your readily available employer match so in this example somebody'' s salary here is eighty thousand dollars as well as their company is eager to match 50 of their 401K payments up to six percent of their salary which suggests if you were to place in six percent your company is going to match 3 percent as well as it makes feeling to try to put in at least the quantity right into your 401k that is going to give you the optimum match that your employer is prepared to offer you however below'' s a few instances so in the leading instance the staff member making 80 000 is putting away four percent so that'' s thirty 2 hundred bucks every year into their 401K fifty percent is 2 ideal so the company is going to match 2 percent or sixteen hundred dollars so this individual'' s obtaining forty 8 hundred bucks a year into their 401K keep in mind if they'' re 50 as well as over they ' re enabled to place up to thirty thousand of personal contributions so this is certainly well below that however at the very least they'' re obtaining a little bit of the firm match next instance this individual'' s placing away five percent so 5 percent of their eighty thousand buck wage 4 thousand buck annual contribution half of that that the company is willing to match 2 and also a half percent provides them an added two thousand bucks so 6 thousand dollars a year is going right into their 401k last example down below this is exactly how they obtain the maximum amount right so this individual'' s doing 6 percent or forty eight hundred bucks into their 401K the employer is providing their optimum enabled match of 3 percent so a total of seventy 2 hundred dollars is what this individual'' s obtaining into the 401K so again the extra you'' re eager to do the more matching you'' re going to obtain um all of these examples are still obviously well listed below the optimum allowed yet at a minimum you desire to put into your 401k what'' s going to obtain you the maximum amount that your employer is eager to provide you into the account as well otherwise you'' re just missing out on out on complimentary cash so you want to get those up um if you'' re finding on your own off course allowed'' s go through a little bit of math all right so in this example this person ' s 47 years old preparation to retire in 20 years at 67. They are expecting that in retirement they ' ll have repaired income of regarding 55 000 so that could be their social security income or some pension revenue or a combination of both but they'' re currently spending regarding eighty thousand bucks so 47 today desire to retire in 20 years investing 80 000 today do you have to element in inflation to see what you'' re going to need in retired life 20 years from currently right so in this instance we took that eighty thousand bucks inflated it at three percent annual rising cost of living presumption over 20 years and that brings the costs requirement at age 67 to 144 000 which indicates if they want to be able to invest 144 000 and also they'' re going to have fifty 5 thousand dollars coming in from pension plan or social safety and security or whatever the shortfall is eighty 9 thousand so that'' s your starting factor right currently you can figure out well what do I require to build up by the time I get to age 67 so that I can comfortably withdraw this shortfall from your possessions that you'' ve built up all right so below ' s a couple situations situation one this person that'' s 47 has already gathered regarding three hundred thousand dollars in their retirement accounts but they require to get to the quantity that'' s going to be able to offer for this deficiency in order to figure out what that is you there'' s something called the the guideline of 4 percent right a safe circulation price is widely thought to be concerning four percent what that implies is that if you might maintain what you'' re drawing from your own properties to four percent of those properties or much less you could be fairly positive that with an internationally Diversified portfolio an affordable rate of return over time those possessions will certainly after that last you 25 to 30 years so when you'' ve calculated your deficiency you just take that number as well as separate it by 4 percent or increase it by 25 the math is the same so in this example this person'' s Target would be 2.2 million bucks by the time they'' re age

67.this over below it'' s or it ' s 50 if you are impaired as well as you have actually to be qualified to your own advantages yet once again if they ' re less than your previous partner then you ' d get the higher of those two advantages here'' s an example of Dave that'' s 62 and also a widow so his spouse died his spouse died and also pair different methods right he could start as early as 62 and also just declare those survivor advantages now and in this instance he would be qualified to 1237 a month the second technique though is that he would certainly take those survivor benefits currently till age 70 and still obtain that very same 12 37 a month but then at his age 70 he might switch to his very own advantage which had the benefit of waiting those years to obtain that higher amount and also at age 70 his own benefit would have expanded to eighteen hundred dollars a month right so simply by planning what'' s offered to you he'' s raised his monthly advantages by 50 and also a 35 percent boost over his life time just by strategizing and comprehending that he'' s got a number of choices here right to make sure that'' s crucial to take notice of okay let'' s chat let ' s talk catch-up payments we ' re currently speaking about how how people ages 50 and up can have additional payments to their 401K plans nevertheless there'' s a couple of extra catch-ups for people also older than that and also this is a brand-new regulation so that exact same 7 500 catch up on the 401K uses for people 50 as well as above as well as once more from ages 59 58 to 59 nonetheless there'' s an adjustment currently an added allocation that was put out there starting in year 2025 individuals ages 60 61 62 and 63 can really make a ten thousand dollar catch-up payment so once again you'' ve got that base degree 22.5 that you can take into your 401k if you ' re 50 as well as above you can add the extra 7 500 to offer you a total of 30 000 but beginning in 2025 if your age is 60 to 63 that catsup can actually be an extra ten thousand bucks so that would certainly make your overall 401K payments for those 4 years as much much as thirty 2 thousand five hundred as well as after that ages 64 to 70 it goes back to that 7 500.

So if you were if you if you'' re finding yourself behind right in your retired life plan in your buildup goals and you get to these ages as well as you had the ability to Max Fund not just the fundamental amount but these catch-up contributions in all of these various age varies right in these initial number of years that would certainly be sixty thousand going into your 401k the following 4 years that would certainly be 130 000 entering into their your 401k and after that these succeeding handful of years that would be an added 210 000 entering into your 401k include all that up that'' s obtaining a practical rate of return we'' re presuming six percent those contributions over that span of time would actually equate to virtually six hundred and also twenty thousand dollars of additional retirement account equilibriums right so they they'' re essentially offering people a way to sort of truly jump begin or accelerate sort of in these years as individuals are getting closer and also closer to retired life to make a much bigger influence on what they'' re able to do away with towards pension okay last point I want to talk regarding is seeing to it that you'' re taking notice of your possession allotment right as you'' re aging as you'' re obtaining closer to needing the money from your pension you actually wish to ensure that you'' ve built a portfolio that can hold up against Market volatility it can hold up against recessions a great deal of people locate as well as in truth the researches have actually been done in around 59 of infant boomers are really over alloted to equities or supplies right as well as we'' ve kind of obtained this little map here showing the different sort of prices of return versus danger degrees when we contrast different property course right federal government treasuries so t-bills t-bonds Etc are going to be the most affordable danger however additionally the least expensive return and afterwards these points just sort of Action Up business bonds still rather low threat rather reduced return yet a little higher on that particular threat turn range after that we enter into supplies right large companies mid-sized firms tiny size firms the danger level increases so does the Target so does the predicted returns yet if you'' re in near retired life in retired life right the volatility the potential for larger downturns is mosting likely to have a larger influence on your capacity to make sure that your properties are still sustainable which you can still have the quantity you need to last for your entire retired life so again it'' s you always intend to focus on your property allowance but it ends up being much more vital and a lot more important the closer you are to needing to begin withdrawing from your funds right you desire to guarantee you'' ve constructed a profile that can endure those Market recessions I think Catherine'' s mosting likely to tell us about our complimentary analysis yet I ' ll also as well as allow me recognize if there'' s any kind of various other inquiries now just had a pair that some are sort of detailed we'' ve obtained several concerns but some are really described so we could have to do those offline however um one is and also I believe you you spoke about it I simply intended to let Elaine know that um she asked if her husband and she just split up they'' re 64 and 58 respectively they'' ve been wed over ten years they ' re both still working he'' s the higher income earner as well as will she be able to accumulate his social security advantages when she transforms 62.

You spoke about it yep so given that they were wed at the very least ten years once they are separated yes she would certainly be entitled to honestly the like if they were still wed her very own advantage or 50 of his whichever one'' s greater right and also then uh there'' s one more one that'claims they ' re in a long-term partnership they maintain their financial resources divide they'' re 38 and 37 and also they have no purpose of ever before obtaining married does this change exactly how we need to each spend for retired life uh that'' s certainly quite details so I wear'' t recognize exactly how much I can really uh give on that yet I suggest it sort of depends right even if they'' re Money if they'' re never ever gon na get wed as well as their funds are constantly going to be totally different but do they like spend for joint objectives together or like it'' s actually each and every single thing separate then you were just going to intend to draw up your goals individually to attempt to Target accumulating for those goals so it type of depends on exactly how different it is appropriate or if there'' s joint objectives that they'' re collecting towards together right that would probably have an impact additionally as well as after that there was an uh one other concern that I assume we can arrive'' s other questions yet we ' ll most likely have to return to them however one was stating that in their in our slides it claims that uh added financial savings annually when we state extra savings annually and also the name of the slide was obtaining off course are you speaking about cost savings or financial investment savings like Investments it must be clear yeah like retired life cost savings so whether that'' s in your 401k or IRA your Roth a combination retired life financial savings specifically fine if you have much more inquiries please schedule your complimentary economic analysis with among the experienced specialists here at pure monetary experts and also they'' ll take a deep dive into your whole Economic image as well as cardiovascular test your retired life profile you'' ll not just learn how to select a retirement circulation strategy that'' s right for you reduce risk as well as take full advantage of return legitimately lower tax obligations now as well as in retired life and also maximize your Social Safety you'' ll additionally find out how to secure on your own versus Market volatility Increasing inflation and Increasing healthcare expenses keep in mind there'' s no cost no commitment this is an one-on-one thorough Financial assessment that'' s customized particularly for you to get your concerns answered we would certainly simply such as to thank you a lot for being here thanks Allison I know there'' s so much details to reach so it'' s hard but this is our you understand we attempt to do these each month to make sure that we can obtain certain subjects as well as if you have various other topics that you'' d like to find out about please let us know that as well

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