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Fee only financial planner gives insights on how to save more on what you earn.
Blog Added: August 03, 2017 08:20:10 PM
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Traveling on a budget

Many people would love to travel more. In fact, in 2016, Americans forfeited 206 million vacation days. That means that workerslost $66.4 billion worth of benefits and, according to a new study from Project: Time Off. Americans used to understand the importance of getting away from the office. From 1976 to 2000, the average working American took off more than 20 days a year. Starting in 2000, workers started taking fewer and fewer days off and by 2015, they only took 16 days off a year. Here...

Many people would love to travel more. In fact, in 2016, Americans forfeited 206 million vacation days. That means that workers
lost $66.4 billion worth of benefits and, according to a new study from Project: Time Off. Americans used to understand the importance of getting away from the office. From 1976 to 2000, the average working American took off more than 20 days a year. Starting in 2000, workers started taking fewer and fewer days off and by 2015, they only took 16 days off a year. Here are some great ways to save money when traveling, so you can use those unspent vacation days and start traveling on a budget.
Fly on slower travel days. Flying a slow travel day will save you on money and anxiety. Use a website like google flights to see which the cheapest days are to fly out. It allows you to see what the cost would be to fly out throughout the week. Also sign up to services that let you know when there are airline sales, one I can't help but recommend is Scott's cheap flights. You can say 25-60% on flights just by checking your email. At any given time, you will get an email on what airline the sale is happening, what months you can book it, and when it most likely will expire. I've seen many times flights that go for 1200 sell for 400.
Build travel into your monthly budget. The average car payment is 503 a month. Do you really need that expensive car you will get tired of in a few months? Think if you chose the class below it, and paid only 350 a month, that would be almost 2000 dollars saved for travel. Do you need to eat out every lunch? You get my drift, once you start thinking how can I budget myself a bit more to be more travel-friendly, you will start to see many areas you can shuffle some cash around to travel. Sometimes as simple as making coffee before you leave for work vs spending 4 dollars at Starbucks every day can go a long way in getting you to hit your vacation milestones.
Don't waste time at a fancy hotel. Do look for one with breakfast included. You are not going to be spending much time at the hotel, so it doesn't need to be over the top. Most of the time you are just paying for the name and can find a comparable hotel a lot cheaper with the same amenities. Also if you like to stay at the same hotel, set up a rewards account. This way as you stay, you can get free hotel stays.
Take advantage of credit card perks. The travel credit card space is becoming increasingly competitive and major banks are releasing new perks and benefits regularly to capture loyal customers. That's phenomenal news for travelers. I myself use Chase sapphire preferred. It allows you to get a 25% bonus by booking travel through them on your points. On top of that, they provide free car insurance, free luggage insurance, and there are even no foreign transaction fees.
Pass on the tourist traps. Tourist traps are the London Eye for 100 dollars when you spend that money doing many other things. Even here in New York, we have them. Times square is overcrowded with rude people and completely overpriced. A free hike, museum, or public landmark is almost always a better experience than the high-priced tourist trap. Many places such as New York, London, and Berlin has city passes that allow you to do many things for one set cost. TripAdvisor also has a great section called "things to do" that will allow you to find cost-effective places to go.
Look for dinner deals. I get it, food is expensive, a friend once told me he spent 2000 for a week of food in Miami. That is enough to literally fund a whole vacation! Not every meal has to break the bank. It's no secret that dining out for every meal can add up. Check Groupon when you get to where you are going. Check the local directory in the hotel as they usually have coupons for you as well. This could be the most expensive part of the trip when you get there, so be very careful how much you spend everyday and don't let it get out of hand.
These are some great idea's on how to save money when traveling. If you have any other questions about traveling on a budget, don't be afraid to email me, or give me a call at (718) 551 - 7131.



Do real estate agents need disability insurance?

As a real estate agent, you are constantly running around. If it's not open houses or client meetings, it's checking out new homes and businesses. If it's not researching neighborhoods, its being on the phone on the road. Even closings have you away from the safety of an office. As you can see, most of your work is physically demanding. Think about it, when you serve your clients and show their homes you are physically going from home to home, office to closing, or even neighborhood...

As a real estate agent, you are constantly running around. If it's not open houses or client meetings, it's checking out new homes and businesses. If it's not researching neighborhoods, its being on the phone on the road. Even closings have you away from the safety of an office. As you can see, most of your work is physically demanding.
Think about it, when you serve your clients and show their homes you are physically going from home to home, office to closing, or even neighborhood to neighborhood. There is no easy way to do it, no any shortcuts, traveling is vital to your career. What if you could no longer do that job? What if you wanted to, but physically you couldn't?
Have you ever thought what would happen if you became sick, ill, injured, and disabled? As someone who is self-employed who lives off of the closings of their clients, how would your bills and expenses be paid if you could not work? The business and lifestyle you created for yourself and worked so laboriously for could instantly be changed. I know what you are saying, it can't happen to me, I am healthy, and I never saw it happen in my office before. You think it won’t. The reality is, that between 20-35% of real estate agents will be out of work long-term for a disability.
Your clients depend on you and look towards you for guidance, but even more importantly your family looks towards you. Your clients may love the hard work that you do, but they don't love you like your family loves you. If you missed 90 days of work tomorrow, how would it affect your child's life? Your spouse's life? These are all tough questions, and the reality of it is that these are real questions you need to be able to answer. Having no plan except the fact that you hope it doesn't happen isn't a plan. there is one way to protect your income and protect your livelihood. It's called disability insurance. What comes out to be roughly 2% of income protects a large majority of your income tax-free. This gives you peace of mind knowing if something does happen to you, you will always have something to fall back on.
I know what you are thinking, I highly doubt I'll ever be wheelchair bound or hospital bound. But in reality, it's far from what being "disabled" is. According to the Council For Disability Awareness, 90% of disabilities are from illnesses (like cancer) than from accidents. That means an illness or condition, such as cancer or a heart ailment, has a higher likelihood of disabling you than a car accident. So that mean's even if you have workers compensation, it most likely won't cover 90% of your disabilities. Now I am not saying this to scare you, but I want to give a realistic case showing why real estate agents and realtors need disability insurance. Do you have some through work? While that is good, most likely it is not enough. Why?
Most likely you pay for your group disability insurance through pre-tax deductions from your paycheck. That may seem great, as it reduces your income for tax purposes, it is not good if you actually need to take the benefit. The benefit ends up being taxable income. So basically, even though the small payment you make monthly is pre-tax, the actual benefit is taxed as income! So if you get 1500 benefit, and it's taxed every month, it really isn't 1500 a month. Come April 15th, you will have a bill due on that benefit. This makes, in effect, your net-disability pay being about 30-40% of your gross salary. Can you and your family live off 30-40% cut to your income?
The good news is that you may not need much more disability income if you have it through your job. How much more you need depends on your income and your basic expenses. Ideally, you want your disability benefit that helps maintain your standard of living, cover costs such as your mortgage, utilities, and groceries, and keep your family's future goals in place.
Now let's get into the nitty-gritty of it. You generally can cover up to 70% of your gross salary. For example, if you have a gross monthly salary of $10,000, you can cover up to $7,000. Most carriers have to underwrite you. Underwriting means they have to check your health records and income statements. Let's say you had a transplant or heart attack recently, they may make some exclusions to the policy that exclude if you have a disability because of that transplant. Also, you can't get covered for let's say 20,000 a month if you only make 5,000 a month. Most carriers will not cover high-risk jobs for the simple reason of an increased probability of disability. A Doctor in the office has a lot less chance of being disabled then a coal miner working 12 hour days. The way they classify the risk is on a scale of 1 to 5 or B to 5A. The lower the number or letter, the riskier the occupation, and the higher the premium, all things being equal. Real estate agents and realtors are typically classified as a 5 or 5A – most of the time the best available classification. Next, there is an elimination period, which is like a deductible. Instead of the deductible like in health insurance where you have to spend money, Disability insurance goes based on days until your benefits begin. For example, a 60 day elimination period means your benefit period will begin after 60 days of disability. This means you need to have adequate savings to carry you and your family until benefits begin. Some carriers allow you to earn "days" based on how long you have policies for. Let's say you have a policy 10 years, and you had a 60 day elimination period. If they give you 2 days a year good health credit, that means in year 11, you only have a 40 day elimination period instead of the 60 day period you are paying for. You can get your disability benefit for as short as 2 years, all the way up to 65 years old.
Now onto what the "definition of disability". You usually want “own occupation” coverage supported by a form of modified occupation. The plans we work with contain this favorable definition for real estate agents and realtors. Disability benefits are income tax-free. Also, as I mentioned before the benefits from group disability insurance plans are typically taxable.
Another thing to think about is optional riders at an additional cost to your policy to best fit your needs and budget. Some popular rider options for real estate agents and realtors, such as Return of Premium Rider: Provides disability insurance coverage if you need it, your money back if you don’t as well the popular Guaranteed Insurability Option Rider: Allows you to obtain the coverage you need now with the option to purchase additional coverage in the future without evidence of good health. You generally can purchase additional coverage every 2 years up to age 55.
One of the best things you can do if you own your real estate agency or are self-employed is enroll in a policy that will pay your business expenses upon a disability. The policy is called a business overhead expense policy. This doesn't need to cover your full income, but this can be cheaper for you as you are just covering your business expenses. Another great thing is that premiums are tax deductible. If structured correctly, the benefits are tax-free as well. This type of policy will ensure your business remains solvent during your inability to work from a disability. This is an additional reason why real estate agents and realtors need disability insurance.
Hopefully this gives you a solid idea why real estate agents and realtors need disability insurance. If you have any other questions, or any of this confuses you, don't be afraid to reach out to me at (718) 551 - 7131 or dperrotto@ceteraadvisors.com



How to Make Up For a Retirement Savings Shortfall

Let's face it, a majority of Americans are massively under prepared for their non-working years, aka retirement. According to research, the average retirement savings for families aged 56 to 61,is $163,577. This is far less than the $1 million that many experts recommend as a target for retirement savings. While Social Security can supplement existing retirement savings, the average monthly retirement benefit of $1,329 most likely will not fill the gap. How can we figure out how to close the...

Let's face it, a majority of Americans are massively under prepared for their non-working years, aka retirement. According to research, the average retirement savings for families aged 56 to 61,
is $163,577. This is far less than the $1 million that many experts recommend as a target for retirement savings. While Social Security can supplement existing retirement savings, the average monthly retirement benefit of $1,329 most likely will not fill the gap. How can we figure out how to close the gap so that we can actually enjoy retirement?
It may seem hopeless for the vast group of people who have limited funds in their retirement savings account but all is not squandered. There are a few main ways to ensure a better outcome in your non-working years if you’re approaching retirement with a savings shortfall.
First one is pretty obvious, save more money. Pretty simple right? Nearing retirement with little in savings could cause many people to take on more risk, with a very low time horizon. Let's be honest, hoping some risky bet to push your savings up so you can get ahead in retirement is slim to none. What most likely will happen if you lose even more money, and put yourself in a deeper hole. A better idea is to just put more money in savings. It won't compound like your retirement did in your 30's but it will help start to close the retirement gap. If you are saving 10% of your income, start saving 20%. Over shorter time frames like this, a doubling of your savings rate leads to a far better outcome than a doubling of your investment returns. Remember, you have control over how much you save, but no control over the performance of the markets. It may be tough to save 20% of your income but the good news is, in your 50's with your kids out of college, your home almost paid off, and your peak earnings years, you should be able to kick it into high gear.
Another way to get through a shortfall is to reduce your expectations. You can downsize your home in retirement, start cutting expenses and build a budget that matches your retirement savings. This will be tough because you are forced to cut back on many things you have become to expect. With most in retirement spending 40,000 a year, and the average social security payment is roughly 1300, there is an ocean between those two numbers. If you have to live off a low fixed income, it doesn't hurt to start bringing down your expenses now, so that you can achieve your lowered expectations.
Lastly, you can always work longer. With many people living longer, the old idea of retiring in your 60s and moving somewhere sunny in the south may be a thing of history. It isn't a bad idea to work longer to stay sharp, keep yourself busy, and to bring in more income, even if it's on a part-time basis. If your savings shortfall is wide, you may be forced to work longer because they don’t have the financial support to stop working. Researchers have found there can be huge financial benefits from extending your time in the workforce. Working longer helps in three areas of your retirement shortfall. It allows you to push back your social security payments, which allows you to get more money in your check when you do take it, it allows you to put more money in your retirement account, which will allow you to pull out more cash when you retire, and lastly, it allows you to not take distributions out earlier than needed.
There is no correct answer for a retirement shortfall, but I do no the answer is never to just hope it works out, and take no action. The soundest strategy includes some combination of the three approaches described here. It’s never too late to recover your retirement if you got a late start to saving, but each choice requires sacrifice now to make things easier later.
If you do have a retirement shortfall, and you need help figuring out how to close the gap do not hesitate to give me a call at (718) 551 - 7131 or shoot me an email at dperrotto@ceteraadvisors.com



Millennials: How to invest when you are on a tight budget

For most millennials, investing as soon as they get out of college is almost impossible. In their most recent survey, the National Association of Colleges and Employers found that for 10 broad degree categories ranging from engineering to communications, 2016 graduates are projected to have an average salary of $50,556.For a college graduate, that is just beginning, that sounds exceptional. But with the rising cost of living, student loans, taxes, and just the basic essentials, many are lucky...

For most millennials, investing as soon as they get out of college is almost impossible. In their most recent survey, the National Association of Colleges and Employers found that for 10 broad degree categories ranging from engineering to communications, 2016 graduates are projected to have an average salary of $50,556.
For a college graduate, that is just beginning, that sounds exceptional. But with the rising cost of living, student loans, taxes, and just the basic essentials, many are lucky to have anything left over to be able to go out on a weekend. After the week is over, and you see your paycheck, you realize you need to start living paycheck to paycheck, month to month, where saving is going to be an extremely difficult task.
All in all, approximately 40% of millennial's don’t invest in the market because they don’t have an adequate income. Still worse, 50% say it’s too precarious to invest in the "market". Most have yet to embrace investing in stocks, bonds, mutual funds, or any type of vehicle to reach long-term goals like, you know, actually being able to retire. So how can you get over the fear of the market?
First things first, many Millennial's have never done, nor know how to do a budget or dissect their monthly cash flow. Every dollar you spend on Starbucks, every Uber called on weekends, and everything in between should be accounted for so you can see the flow of your money. You should look for choke points in your budget. Are you spending too much on a cable bill you barely watch? Are you spending more money on Uber every month then you think? How would you really know unless you build out a budget and see where your cash actually goes. How do you go about making a budget? You can head over to here and input the all your data to see how it looks.
Second. Start paying yourself for everything else. The book RichDad PoorDad focuses on this. Pay yourself before you pay any bills, and debts, or spend money on anything fun. specifically, Save 5% in an emergency fund and 5% in a retirement account to start. If possible save 10%. Before you do anything else with your paycheck make it's automatic. This will force you to budget yourself and work around your savings, as opposed to whats left after you spent your cash for the month. This most likely is your last priority, where you are hoping to hold some cash week over week, month over month, but what you are going to force yourself to do, is take your last priority, and make it your first.
Be accountable. Don’t be ashamed to ask a friend or family member that you look up to for help. Ask them to keep you accountable to keep you on the road to your long-term goals. When you are forced to be accountable for your actions, and in this way, your goals, you have a much greater chance of achieving them, especially when the person that is keeping you accountable is on your side.
Once you start pulling in more income, one of the biggest mistakes you can make is lifestyle creep. What is lifestyle creep? For example, let say your salary increased by $10,000, you most likely would like to buy a new car or get a larger place to live, maybe even the same size in a better area. This sounds great, right? Brand new car, GPS in the dash, nice new home to furnish, all fun. Wrong. Instead stay where you are for as long as you can, and use your raise to better yourself by saving 50% of the raise, applying 30% toward paying off debt and spending 20% on what you want. In the long run, at your age, it will be compounded that you can get out of debt quicker now, then let interest continue to erode your net worth. Debt is the killer of growing your assets.
At this point, actually, start investing money. The key to investing is to get into the market in a way you feel comfortable. If you want to keep it simple, you can invest in target date funds (Funds that change based on your age), index/exchange-traded funds(Funds that trade like stocks that are cost-effective), or even go the route of a robot advisor for your money to be professionally managed in a low-cost way. You can even hire a financial advisor if you want something more complex. The bottom line is you should be setting up a plan where you can automatically put money into an account every month.
This is a great way to start saving and investing when you are on a budget. If you want to dive in further, don't be afraid to give me a call at (718) 551 -7131. Investments in securities do not offer a fix rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than originally invested. No system or financial planning strategy can guarantee future results.



Life Insurance Q and A

As an advisor, I get asked a lot of questions about life insurance, and polices that already are in force, so I put together a few Questions and Answers that I get asked the most about, and how each one effects the insured/owner. If you have any other questions, don't hesitate to give me a call. Q: I currently have a life insurance policy; could I get a better price elsewhere? A: Short answer, most likely. The long answer is that it depends on quite a few factors, and there’s no guarantee...

As an advisor, I get asked a lot of questions about life insurance, and polices that already are in force, so I put together a few Questions and Answers that I get asked the most about, and how each one effects the insured/owner. If you have any other questions, don't hesitate to give me a call.
Q: I currently have a life insurance policy; could I get a better price elsewhere? A: Short answer, most likely. The long answer is that it depends on quite a few factors, and there’s no guarantee that your price will drop with a second application. One of the biggest things to keep in mind is your age. The older you are, the higher your chances of dying, which will increase the baseline price of a policy. Also, as you get older, the chances of something being wrong with you increases as well. Applying for a policy at 50 will be more expensive than applying at 40, all other things being equal.
Q: Guess what! My health has improved since I got my last policy, should I reapply for a better price? Depending on how much your health has improved and the amount of time that has passed since your previous application, you could see significant price drops. One of the biggest ways to drop the price of your insurance is smoking. It’s one of the priciest things that you can do with regard to a life insurance application, and typically, you need to have kicked the habit at least one year before life insurance carriers are willing to look past your tobacco history. A smoker in his 40s can expect to pay three to four times as much.
Q. My last agent sold me a policy from the company he worked for. Can I get a better price if I shop around? A. This means that the agent that sold you the policy was what we call, captive. This means he only represented one insurance company. There are dozens of life insurance companies, and all offer different prices, benefits, and riders. The first thing you should do is work with an independent agent who isn’t forced to only work with one company. It’s very possible you will find a better policy with a better price. To give you a comparison, it’s like going to the store to buy a car, but they only have one car in one color for one price. To make sure you are getting the best price, ask for multiple quotes.
Q: How long does it take my beneficiaries to get my life insurance death benefit? A: Once the death benefit claim form and a copy of the death certificate have been received by the carrier, beneficiaries typically receive the death benefit check within 14 calendar days. Just remember, if the insured dies within two years of the policy, the insurance company has the right to investigate the death, so it may take a little while longer.
Q: How do I know my beneficiaries will get paid the death benefit? A:Life insurance companies have been around a long time, and have gone through many trials and tribulations. They are not in the business of ripping beneficiaries off. As long as your policy is in force at the time of your death, meaning it was paid up and in good standing, your beneficiaries will receive the death benefit payout. There are only a few exceptions to this, such as fraud.
Q: Are there any situations in which my life insurance policy won’t pay out? A: There are three instances in which a life insurance company can choose to deny or reduce a term life insurance policy’s death benefit. Let’s look at each one in detail;
Contest-ability Period Life insurance companies include a provision called an “Incontestability Clause”. This clause basically says the Life insurance company has a specific period of time (In a majority of cases, it’s 2 years) to contest the validity of any statements made on the insurance application. So if something happens to the insured within the “incontestability” period, the company has the right to investigate. One really easy example of this is, if you said you do not smoke cigarettes, so that you could pay less for insurance, when in fact you actually do, the insurance company would check your medical records, and may out right deny your beneficiaries claim.
Suicide Clause Another situation where a life insurance company would most likely deny your beneficiaries claim would be if the insured commits suicide within a certain period of time (again, most likely two years). They would deny the request, and return all premiums paid to the family, as opposed to outright denying the claim.
Homicide The last reason an insurance company may not pay a death benefit is over if the insured was murdered. The Insurance company would in this cases ask for a police report to make sure the beneficiary of the policy isn’t a suspect. If the beneficiary is a suspect, they would hold payment until the charges are dropped or the beneficiary is declared not guilty.
Q: Will my life insurance death benefit payout be taxed? A: In most cases, your beneficiaries will not have to pay federal or state income taxes on the death benefit they receive. Premiums are paid using after-tax dollars, so they have been already taxed. There could be two exceptions to this rule, either through Estate taxes, or Gift taxes. If you own your own policy, the death benefit proceeds become part of your taxable estate. If your estate exceeds the exclusion amount, which as of 2017 is $5.49 million, it can get taxed. For most people, this isn’t an issue. The second exception can happen If the policy owner, insured, and beneficiary are three different people, the death benefit could count as a taxable gift to the beneficiary. One option to remedy both exceptions is to use an irrevocable life insurance trust. <~~ Link this to blog
Q: How can I be sure my policy’s life insurance company will still be around when I die? A: All major life insurance companies have financial strength ratings. There are multiple agencies each with their own rating scales and standards that assess the long-term financial stability. These ratings follow an A through F scale. The higher the rating, the more stable the company is and the more likely the company will be able to pay future claims. When you are looking to purchase life insurance, whoever you are using to buy it through, should tell you their rating. Any company with an A rating or better I’d consider financially stable.
Q: How often should I review my policy? A: I suggest reviewing your life insurance policy once per year to make sure you have enough coverage. I’d also suggest getting a quote to make sure you are paying the least amount for the most amount of coverage and features. Most importantly, if any life and circumstances change, such as getting married, having a child, buying a home happen, you should upgrade your coverage.
Q: What should I look for during my policy review? A: When reviewing your policy, you should look for anything that may need updating. Examples include your name, address, phone number, billing information, and beneficiary. You should review also your financials. You should ask yourself; Is this enough coverage? Did my health change for the better? Do I think I can qualify for a better rate? Any or all these can be reasons to review your policy.
Q: When should I update my beneficiaries? A: Make sure you keep your beneficiary designations up to date. There are certain life events that you will want to change beneficiaries. These include: Marriage or divorce, the birth or adoption of a child, or your designated beneficiary passes away.
Q: When should I apply for a new policy for more coverage? A: This is a catch 22. As you get older, your insurance needs change, but your premiums will rise considerably. You may have purchased a small insurance policy when you were fresh out of college to cover your student loans. Ten years have passed and now you’re married with kids. You would want to increase you policy to cover your kid’s schooling, as well as maybe a mortgage, etc. Any time you have a life changing event such as being married, or having a child, it’s a good idea to apply for a new policy with more coverage.



The Four Walls of Retirement Income

With people living longer then ever, and now the average life expectancy moved up to 87 years, many people ask themselves Will they outlive their money? It might seem impossible to answer. Who really knows how long they will live, never mind the roller coaster of the investing world? This answer seemed so much easier, back in the day. Yet you can know some things, such as how much income you are likely to need in retirement, and how much you will likely generate when you actually retire....

With people living longer then ever, and now the average life expectancy moved up to 87 years, many people ask themselves Will they outlive their money? It might seem impossible to answer. Who really knows how long they will live, never mind the roller coaster of the investing world? This answer seemed so much easier, back in the day. Yet you can know some things, such as how much income you are likely to need in retirement, and how much you will likely generate when you actually retire. But income is the first step. After you stop working, how much money you have coming in each month will determine not only your lifestyle but the likelihood of that money lasting as long as you need it to last.
1. Social Security
It's much easier to figure out your income from Social Security contributions now than it ever has been. The government has long mailed out annual estimates, but now you can go online and look up your current retirement income analysis any time you like. Go to My Social Security and create an account. It will take a few steps to identify, but it's well worth it. From there, you can easily see what the Social Security Administration currently believes you will receive at early retirement (age 62), full retirement (67) and at age 70, the latest age at which you can file for income benefits. This should make up roughly 43% of your retirement income on average.
2. Pensions and annuities
This is increasingly rare for American retirees, but if you work or worked in the past for a government agency or a large corporation, you might have a pension plan waiting for you. This is also known as non-contributory deferred retirement plan. Likewise, you may have purchased an annuity inside an IRA as well. You can learn the ultimate monthly and annual income values of such plans by directly contacting the plan administrators. You should be getting a quarterly statement. If not, make sure they know where you live and how to contact you. This should make up roughly 25% of your retirement income on average.
3. Portfolio holdings
Income from investments can be difficult. I like to suggest that 4% is good percent of money to withdraw from a conservatively invested portfolio, a majority of that withdrawal coming from dividends. However, like investing itself, income from investments is a moving target, and can change at any given time. The important point is to make sure that your calculations include income from the other three walls here, and that you stay smart about income taxes in retirement as well. On average this makes roughly 12% of your retirement income.
4. Working
It's easy to give up and say, "I'll just work forever!" But if you know what to expect from the previous three income sources, it might change your attitude toward what work you choose to continue doing and for how long. For instance, rather than seeking part-time work year-round, your income from Social Security, a pension and investments might create an opportunity to work seasonally and perhaps travel off-season. Balancing work and play is no less important in retirement as it was during your full-time working life. On average this makes up roughly 11% of retirement income.
In the end, a good retirement must be managed, much like a good career. Once you add up all of the potential income sources, things often start to look better, and if coordinated correctly, your foundation, and 4 walls will hold your financial house up well through retirement.
Putting The Four Walls of Retirement Cash Flows Together
Ultimately, these components of interest, dividends, capital gains, and principal form the four walls of your retirement income house. In some years, the biggest drivers to total return are from interest and dividends, which can be taken and spent. In other years, a bull market means ample capital gains that can be liquidated for retirement spending instead, especially in times of low yields from interest and dividends. In down years, it may be preferable to tap principal, in order to leave the rest of the portfolio invested for a hopeful future rebound. In fact, diversification across the four walls of retirement income can be a highly effective way to protect against the potential stressors that can adversely impact a retirement plan.
It's crucial to recognize that not all retirement income is actually taxable income. In fact, the process to optimize the tax-efficient liquidation of retirement accounts is entirely separate, including determining when to tap taxable vs pre-tax vs tax-free vs tax-exempt accounts, proper asset location of available investment assets across the different types of retirement accounts, as well as ongoing tax-efficiency strategies like the timing of harvesting capital gains and losses and converting your tax deferred account to tax free. One goal is to make the same amount of money stretch as much as possible, and tactfully managing your tax bracket is going to build the roof of the house.
But again, that’s actually the whole point of relying on all four walls for your retirement income. You don’t necessarily know which one will produce the desired results from year to year, but diversification gives you the best shot to get it from somewhere, without taking on excessive risk or portfolio concentration in stretching for yield along the way.
With you as the foundation, the four walls holding up your financial roof, you can make it through retirement, and not outlive your money.



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