Most people are diligent about putting away some of their income so that they can live a comfortable retirement. There are many vessels available for this type of saving, some with current tax advantages, others with future tax advantages. But the traditional retirement strategies all have limitations, either in contribution amounts, distribution requirements, or very restrictive tax implications. Two main problems with traditional retirement accounts are the future tax bill that will be paid at retirement and the limits on how much can be contributed. Another issue with traditional plans is that diversification of investment types is considered but tax diversification is often ignored. If all retirement funds are in a deferred account, the distributions may end up putting the retiree in a higher tax bracket after retirement. The risk of outliving the retirement benefits is also becoming more of a concern as the population lives longer and health care costs accelerate towards end of life. And if the saver doesn’t make it to retirement due to a premature death, the plan will likely fail. Using life insurance as a supplement can help mitigate some of the limitations of the traditional plans.
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RETIREMENT INCOME PLANNING
Throughout this decade, more than 10,000 baby boomers will retire each day. But a large portion of them consider themselves unprepared for life after work. Research shows of workers 55+, nearly 60% have less than the anticipated amount saved to last throughout their golden years*. Additional questions like when to retire and claim Social Security adds layers of complexity. Increasing longevity coupled with the uncertainty of government benefits, means "boomers" and following generations will have a common goal: establishing a significant source of income that is guaranteed for life.
*2014 Retirement Confidence Survey. Employee Benefit Research Institute www.ebri.org.