Make Your Own Pension

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6a017c332c5ecb970b01a73df22bdd970d-320wiJim Lorenzen, CFP®, AIF®

Wouldn’t it be comforting to know you’re retirement is assured?  An income you can’t outlive does have appeal.  People who retire from the government have a steady income stream.  They don’t have to manage portfolio withdrawals with actuarial precision in a world where change is a constant.

It’s no wonder that a Towers Watson survey found that retirees relying on pension or rental income are less anxious than those living off investments.  Of course, those living off rental income aren’t really retired – they’re in the real estate rental business; but, that’s another story.

People can pay cash for a retirement income, however.   According to a story in the current issue of Money[i], a 65-year old man can buy a $500 monthly income for life with $100,000.  It’s called an immediate fixed annuity.  Heck, that’s $6,000 a year!   It is taxable, but it’s also likely more than your investments pay on an after-tax basis, even if you were to take it all in capital gains.

If you have some expenses that are guaranteed to be there forever, add them up and see how much they come to each year.  Subtract the amount you receive from Social Security, and the remaining gap is the amount of guaranteed income you may want to consider purchasing.

Of course, you don’t have to buy all of it.  You may want to buy a portion of it, to start out, if getting comfortable with the idea is a challenge.  You can also purchase immediate annuities from more than one insurance company.

While immediate fixed annuities can provide a guaranteed income for life, the income is taxable; but, that’s what happens if you wait until retirement to buy one.

If you begin planning early – in your 40s and 50s, even up to age 60 – you might be able to arrange for an income tax-free retirement income and never have to worry about what the politicians will do to your taxes again.  According to David McKnight’s book, The Power of Zero, endorsed by CPA Ed Slott, it’s a strategy being used by 85% of Fortune 500 CEOs and many members of Congress.

I’ve written a report about it that’s free for those who would like to receive our ezine, IFG Insights.  You can get the report here.

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Enjoy!

Jim

[i]Don’t Shortchange Your Retirement” by Donna Rosato, Money.com, August 2015.

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Interested in becoming an IFG client?  Why play phone tag?  Schedule your 15-minute introductory phone call!

Jim Lorenzen, CFP®, AIF®

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.  IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.

Opinions expressed are those of the author.  The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.

Jim's picture
Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-based registered investment advisor with clients located in New York, Florida, and California. He is also licensed for insurance as an independent agent under California license 0C00742.

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