Retirement Strategies

Creating Retirement Income

The 2011 Retirement Security Roadmap released by the National Institute on Retirement Security states that 84% of Americans are concerned about their ability to achieve a secure retirement.

Americans have lowered their expectations of what a secure retirement will be like;

  • 34% of Americans expect to survive comfortably.
  • 17% of Americans hope to be able to their bills.
  • 11% of Americans expect retirement to include leisure, recreation, travel and restaurants.

The study also found the three-quarters of Americans believe that stock market volatility makes it impossible for the average American to predict how much money they will have in their nest egg when they retire.

Individuals fund their retirement income from four potential sources: Social Security retirement benefits, employer retirement plans and IRAs, personal savings and investments, and post-retirement employment.

Social Security

The Social Security “normal retirement age” is the age at which the full retirement benefit becomes payable. The amount of the benefit depends on the person’s earnings history and age when payments begin. Previously, the normal retirement age was 65, but under current law it increases in stages for people born in 1938 and after, eventually reaching age 67 for those born in 1960 and after. Individuals may take a reduced monthly benefit as early as age 62. Once payments begin, they are subject to annual cost-of-living adjustments. Social Security retirement benefits are generally nontaxable, but become partially taxed if the retiree’s income (or joint return income) climbs above certain threshold amounts.

According to the Social Security Administration, less than one third of people who receive Social Security must pay some taxes on their benefits. (Source: www.socialsecurity.gov/pubs/10024.html.)

Qualified Plans and IRAs

Qualified employer retirement plans may be defined benefit pensions, which pay a pre-established monthly benefit to the retiree, or a defined contribution plan, in which the employee’s individual account balance at retirement determines the retirement benefit. 401(k), 403(b) and profit-sharing plans, in which a participant has an individual account balance, are very popular.

Individual Retirement Accounts and Annuities (IRAs) may be“traditional” or “Roth” IRAs. Contributions to traditional IRAs may be tax deductible, while Roth IRA contributions are made with after-tax dollars and are never deductible. Distributions from traditional IRAs are in whole or in part taxable as ordinary income. Distributions from Roth IRAs may be federal income tax free if certain strict requirements are met.

Personal Retirement Savings

People preparing for retirement can make use of a wide variety of personally owned savings and investment vehicles during their working years. Among those most widely used are savings accounts, certificates of deposit, money-market mutual funds, and government savings bonds. 

Speculative investments such as stocks, bonds and mutual funds are also popular. Another sector is precious gems and metals and includes personally owned bullion or coins, gemstones, and stock in mining operations. Real estate can also generate retirement income and includes personally owned property and property owned through an entity such as a limited partnership.

Annuities can provide retirement income in fixed or variable amounts over the annuitant’s life or the life of a second annuitant such as a surviving spouse. Annuities may also provide income tax deferred accumulation and creditor protection*. LIFPro, a confidential private sector strategy which may provide participants tax deferred market driven growth with no market risk, income tax free retirement income, statutory creditor exemption in certain states* and income tax free survivor benefits as well as critical or chronic care benefits. 

It is important for people to consider their risk tolerance and time horizon when selecting personal retirement assets. Ask your TCFG advisor to help you evaluate these various tools and their suitability to your specific situation.

*Varies by state. Texas Property Code Section 42.001  Texas Insurance Code Section 21.22 -1108  Unlimited exemption of cash values and proceeds of personally owned Life & Annuity insurance contracts

The best time to plan is before you have to. If you wait until you have to plan, you are reacting and not planning, and your options are very limited.
Stephen Hull MBA, RFC
Registered Financial Consultant
All well managed portfolios hold defensive reserves.
Harlan W. Wiese RFC LUTCF CLTC
Private Client Division Brokerage Manager
The success of a financial strategy is often more dependent on its systematic nature than its rate of return.
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Private Client Division
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Registered Financial Consultant President General Agent
Compound interest is good, compound taxation is bad.
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Registered Financial Consultant Managing Partner - Denton
Successful people make a habit of doing what unsuccessful people are unwilling to do.
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Private Client Division