| With 330 per hour turning 62 in 2008, is it any surprise | | | | dividends without liquidation of the underlying |
| that the transition from work to retirement is on the | | | | investment. A properly funded income portfolio could |
| mind of many of the baby boomers? While | | | | continue to provide income year after year without |
| accumulating, the boomers had learned plenty about | | | | selling shares. The secret is maintaining ownership |
| saving for retirement. Strategies like dollar cost | | | | through the volatile markets. Assets not required to |
| averaging, deferring taxes and leveraging debt all | | | | fund income can be allocated to a variety of growth |
| made sense. However, did you know that many of the | | | | devices. From time to time a transfer from growth |
| accumulation strategies may not apply in retirement? In | | | | devices to income devices may be required to help |
| fact, they may be down right dangerous. | | | | your income keep pace with inflation. |
| Dollar Cost Averaging (DCA): An accumulation | | | | Tax Deferral: we invested into pretax plans based on |
| strategy proposes that market volatility provides | | | | the premise that tax rates would be lower in |
| opportunity to purchase more shares, at a lower | | | | retirement, but are they? Ask a retiree! We were told |
| average cost per share as investment go through their | | | | defer, defer and defer. However, without a carefully |
| normal price swings. In the same manner, generating | | | | thought out distribution strategy you could pay a much |
| retirement income by systematically selling as shares | | | | higher tax rate on retirement distributions or when |
| go through their normal price swings would also result | | | | passing these assets to your heirs, than was provided |
| in selling at a lower cost per share. Certainly this is not | | | | during accumulation. |
| the objective of a retiree! The misunderstanding of the | | | | Managing taxes while providing cash flow in retirement |
| investment objective (accumulation or income) caused | | | | can be a tricky matter. A focus on eliminating the |
| many retirees to reduce lifestyle or return to work as | | | | mortgage and other debt prior to retiring will reduce the |
| their portfolios were decimated by the combination of | | | | demand retirement plan distributions without loss of |
| the falling stock markets and monthly distributions | | | | lifestyle. Employees with the stock of their employers |
| required to provide retirement income. | | | | in an ESOP or 401(k) are afforded special tax |
| A typical retirement calculator will illustrate: if you earn | | | | treatment when separating from service. Capital gains |
| 9% and distribute 5% the remaining 4% is left to grow. | | | | can be managed, retirement income could be |
| Deep down inside you know that this can not work if | | | | augmented with Roth IRA distributions. These |
| the distribution rate is fixed while the price of stock | | | | strategies not only reduce federal and state and |
| based investments could rise or fall at any time. | | | | capitol gains, they may also reduce or eliminate |
| Many have tried to (sell at the high points) time the | | | | taxation on Social Security resulting in a compounding |
| market. However, consider this. The Dow was down | | | | affect of tax savings. |
| from 1999 to 2006. An attempt to avoid selling until the | | | | The tax code is passive in the favor of the IRS. To |
| investment was up may have resulted in a forced | | | | receive benefit of even basic tax strategies requires |
| sale, potentially at the markets lowest points. | | | | analysis and action before the end of each tax year. |
| Face it, once retired, our monthly income requirements | | | | When working within the tax code, saving money on |
| go on. We will continue to need monthly income until | | | | taxes is nearly risk free and certainly tax free. |
| we die or win the lottery and we will need it regardless | | | | The strategies and tools we implemented for |
| of the state of the market, the price of gold or | | | | accumulation are not bad, they are simply for |
| whether were at peace or war. So how do you | | | | accumulation. The job has changed; a new strategy |
| reduce the risk of funding retirement income? A | | | | and suitable tools for retirement are recommended. |
| portfolio of bank accounts, loan portfolios, bonds, REITs | | | | With proper investment management and income tax |
| and dividend paying stocks may provide the answer. | | | | planning retirees can retire sooner, spend more or |
| These "income devices" provide annual interest or | | | | leave more to their heirs. |