Paying Bills is the Main Jugular Vein Issue in Retirement

How many retirees use their actual required minimum distribution (RMDs) calculation to withdraw income? Most wouldn’t use it. Their cash flow needs are greater than what their RMDs can provide. How many people use qualified longevity annuity contracts to defer RMDs? Most shouldn’t use it. They just can’t afford to forward money into the future, when their presence cash flow demands are so crucial to pay necessary bills. How many give away qualified charitable contributions from their qualified plans? Most couldn’t do it. The vast majority of seniors have big hearts, but no discretionary money to give away. These basic retirement tax strategies have little to no impact on the vast majority of retirement plans. So, there’s no reason to clutter your conversations with prospects and clients with unusable information that’s irrelevant to their situation.

For most Americans on Medicare, paying guaranteed bills that increase every year is the main jugular vein issue that every other financial decision pivots off of. It’s almost always the underlying cause of a failed retirement.

Social Security benefits can help, but rarely generate enough income to pay the guaranteed bills of retirement in the twenty-first century. Seniors with pension income in concert with Social Security benefits should be able to generate guaranteed income to pay their guaranteed expenses in retirement. But most Americans have defined contribution plans and not defined benefits plans. So, finding other alternative sources of guaranteed income to combine with your Social Security leaves you with two options: Home Equity Conversion Mortgage (HECM) income or a type of lifetime annuity in your Roth IRA or (if necessary other qualified plans.)

HECM income can be designed to generate tax free distributions as a reverse mortgage loan. The tax-free income, unlike tax free municipal bond income, is not included in the provisional income test for Social Security taxation. Adding income from a HECM reverse mortgage to your Social Security benefits could be a significant solution to paying bills in your golden years.

Another tax-free source of income could be using the assets in Roth IRAs to fund a single premium immediate or deferred lifetime income annuity (joint if you’re married.) Income from a Roth IRA is tax free and is not included in the provisional income test for Social Security taxation.

If that’s still not enough guaranteed income, consider a single premium immediate or deferred lifetime income annuity (joint if you’re married) from defined contribution plans like 401(k)s and IRAs to generate additional guaranteed income with Social Security benefits. The qualified plan annuity is taxable and is included in the provisional income test for Social Security taxation. So, make sure the annuity income is large enough to compensate for the taxes it will generate.

If every distribution dollar really matters in retirement, you need to offer guaranteed solutions that pay the guaranteed bills in retirement.

Steve Sevant Steve is a syndicated financial columnist, talk show host and popular platform speaker. He is also a nationally recognized videographer, content creator and co-contributor to Advisys, InsMark and LifeSpecs. Steve’s videos and content are distributed to over 280 media outlets and 200,000 Twitter users. To contact him visit www.lifesizesolutions.com