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Annual $13 passive income financial management, a practical case evaluation of tax-free retirement income planning for American families

We often hear that American life insurance policies can be used with accounts such as IRA to make a familyTax-free retirement income planning, So what exactly is this plan? What is the professionalism of the plan? Is there a practical case to help us understand the planning process?

Michael Clementi, from LifePro, a wealth management institution with a 30-year history,American Life Insurance Guide'S contribution shared their most recent oneRetirement income planningCase presentation report, showing theRetirement planningThe process of risk management ininsurGuru©️Insurance AcademySome localized translation, editing and typesetting were performed on the submitted content.

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Linda, female, 46 years old, in CaliforniaIrvineA technology company serves as a manager and plans to retire at the age of 61.she wasI hope to maintain a standard of living with an annual income of US$9 after retirement(After adjusting for inflation index,Approximately $61/year at the age of 130,347), we expect an average return of 6% during this period.

In order to achieve this retirement goal, Linda began to invest in stocks, manage her retirement accounts, and invest in mutual funds with low management costs.Although Linda spends a lot of time watching this account every day, the return may be good, but after a long time, Linda feels tired and tired of watching the market day after day, trading, ecstatic about the market rise, and worrying about market fluctuations. .At the same time, Linda is responsible for the company's departmental affairs. High-powered and fast-paced work almost takes up most of her time. It is difficult to balance the two in time.

Without professional planning and assistance, Linda will use the traditional 4% withdrawal strategy to withdraw her retirement account after retirement.This is the same as professionalRetirement planningWhat is the difference between the later schemes, the analysis of this article will give a chart comparison.

Linda's asset account situation

Linda's current personal retirement account (IRA) has a balance of $341,571.At the same time, Linda's Roth IRA retirement account has a balance of $113,119.

Linda works for an Irvine technology company and holds company stocks worth $187,064. At the same time, Linda buys an additional 2 stocks each year.

Linda said that her annual income is 15.6 U.S. dollars, and she owns a rented house, and her annual rent is 1 U.S. dollars.

We sorted out Linda's asset status and produced this table:

Assets-detail-wm

What does Linda want?

Linda hopes to break away from the time-consuming and endless financial management methods of the past and devote more time to the family, enjoy life with children and family members, and travel the world.Her goals are the same as most of us:

  • Have a stable source of income after retirement
  • The economic resources after retirement can be maintained at a quality level stably and for a long time;
  • Avoid the risk of market fluctuations and do not want to continue to worry about it;
  • No tax worries-the United States is an excessive tax;
  • Avoid the risk of assets being devalued by inflation;

If Linda keeps going on her own way

If Linda continues in the current way, what will happen to her financial and asset status after retirement?The following figure is the chart drawn:

Retirement-income-1-wm

Linda’s current plan shows her financial situation. The light blue represents the target pension she hopes to receive each year (calculating the inflation rate), andDark blue indicates a guaranteed source of income: rent income and social security pension.The red part is the money that must be withdrawn from various other accounts each year.The sum of the red part and the dark blue part is the target retirement pension required each year.

From the above figure, we can see that there are more and more red withdrawals, and in the current plan, the withdrawals come from accounts directly related to the stock market. Once the market fluctuates, it will affect retirement income.The figure below is a retirement forecast table analyzed based on Linda's current situation. It is divided into three parts: guaranteed source of income (blue), annual withdrawal (red), and asset status (green).

After calculating this case, Linda’s chance of successful financial retirement is 70.3%; after 10 years, the chance of successful financial retirement is reduced to 57.8%.Why is this?The answer is: income composition and risks.

The risks we need to help Linda manage are

1. Sustainability risks

For couples over 65 years old, there is a 50% chance that at least one will live to 91 years old.Sustainability is not a risk in itself, but it is a risk amplifier.If we live long enough, the chances of encountering a stock market crash or financial crisis will greatly increase.If we live long enough, as we age, we will sufferChronic disease, The chance of needing medical attention has also increased greatly.Is our money enough at that time?Can I pay medical bills?This is a question that needs to be considered.The solution to control this sustainability problem is to plan a part of the plan to provide lifetime income.

2. Risks in the stock market

Some people who are planning to retire may bet heavily on the stock market. According to the 28 principle, 80% of people may lose money.Some people who invest in the stock market may be too conservative and missed opportunities.The stock market is very volatile. In 2008, a financial crisis halved many people's pension accounts and disrupted their original retirement plans.It is very important to transfer this risk when you are about to retire.

3. The risk of income tax rate

At present, the tax rate of the United States is at the lowest average in history, and the national debt of the United States has piled up into a mountain, which is the highest point in history.We recommend that readers of the American Life Insurance Guide use common sense to think about "debt and tax rates."Therefore, for the accumulation of wealth, choosing the right "tax rate channel" is very important.If we now have $1,000,000 in a tax-delayed 401K retirement account, some of this money is definitely taxable. It does not belong to us, but to the government.If the tax rate remains at 30%, then when you retire, $300,000 of this pension must be handed over to the government.

4 The risk of inflation

Inflation is part of our economic life.The prices of food and services have become more and more expensive year by year.In 30 years of retirement, a 3% inflation rate will weaken the purchasing power of our retirement pension by 50%.We not only need to protect our continuity and assets for retirement, but also let them outperform inflation.

The final solution

Through the management of 4 kinds of risks, our final solution is to transfer 20 US dollars from the customer’s IRA account and invest it in a fixed index annuity product with a lifetime income additional clause (Rider).We will start this when Linda is 61 years oldadditional terms.At the same time, it is planned to use the 2 US dollars to buy the company’s stock each year and re-plan it into a 15-yearIndex insurance(IUL), used to provide tax-free retirement income after the age of 61.

Retirement-income-2-wmThe above picture is based on the perspective of risk management, after professional planning and design of the income composition plan.We can see that Linda's source of income has undergone major changes.The dark blue part of guaranteed income sources has been significantly improved, the green part of tax-free retirement income has been supplemented, and the red withdrawal part, which bears the most market risk, has been effectively compressed to the lowest income proportion.

Income-break-down

The above picture is a professionally designed and planned retirement forecast form, which is divided into three parts: guaranteed income source (blue), annual withdrawal (red), and asset status (green).Before comparing, we will find thatThe blue guaranteed income accounted for more than 6% of the source of income in the six years before retirement, and the subsequent proportion reached 65%.The dependence on the proportion of income sources in the red part is gradually decreasing.

Another huge change is in terms of assets in the green column. Linda’s current plan does not focus on the accumulation of assets, which can accumulate up to 5 million US dollars. After professional planning, the total assets have exceeded the 90 8 million U.S. dollars, which is a full 3 million U.S. dollars, which is also a lot of wealth for children.

Article summary

Linda's current plan Proposal after professional planning
Probability of successful retirement
Probability of successful retirement
Proportion of guaranteed retirement income:35% Proportion of guaranteed retirement income:97.8%
Total assets at the age of 90:$5,426,276 Total assets at the age of 90:$8,750,621
Total retirement income:$2,004,260 Total retirement income:$5,599,122
Annuity income: 0 Annuity income: $2,131,023
IUL income: 0 IUL income: $1,200,000
Social Security Pension: $1,177,276 Social Security Pension: $1,441,114

Through case sharing of professional planners, we hopeAmerican Life Insurance GuideReaders can also refer to this method to analyze and compare our retirement income structure.At the same time, through the case analysis, we learned about multiple retirement income channel strategies or familyUSD asset allocationStrategies to help us successfully achieve the goal of safe retirement and old-age care and longevity.

(©️LifePro American Life Insurance Guide Network Editor)

 

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