Income Planning: Preparing for One’s Financial Future

Income Planning: Preparing for One’s Financial Future

In the complex process of retirement planning, there is one commonly-overlooked area. This area is the concept of retirement income, or keeping streams of income flowing after one retires from work.

Retirement accounts have many benefits, but there are also significant limitations inherent in these plans. While it is important to set aside funds for use in one’s retirement years, managing distributions from retirement accounts is critical.

There are many strategies involved in this concept, and the income planning professionals at Balanced Financial, Inc. can help. Based in Fort Collins, Colorado and founded by noted financial expert Greg W. Anderson, Balanced Financial has helped thousands of clients navigate the complex waters of retirement income planning.

What Is Income Planning?

Most people understand that retirement savings is the key to stability once the paychecks stop coming in. While Americans typically fall far behind on retirement savings – setting aside only a fraction of the money needed for future expenses – familiarity with the concept is quite common. Retirement savings strategies may take many forms, including:

  • Employer-sponsored pensions
  • Government benefits like Social Security
  • Individual Retirement Accounts (IRAs), including Traditional and Roth forms
  • 401(k) and 403(b) plans
  • Traditional stock and bond investments
  • Annuities
  • Life insurance policies
  • Real estate investments

It is important to note, though, that although there are many potential ways a person can set aside money for retirement, what happens to those funds when retirement age is reached is even more critical. It is here that the concept of income planning takes center stage. What is income planning? In simple terms, it is the process of establishing a roadmap of account and benefit distributions to ensure a steady flow of income in retirement. This can include methods of turning assets into income to fund future expenses.

Assets Into Income

You’ve saved and saved throughout your career, amassing a substantial sum of money for retirement purposes. What now? How do you turn those accumulated assets into a steady source of income that you can tap throughout your retirement years? Income planning professionals can help lay the groundwork for a systematic strategy to convert retirement assets into income without the high taxes and penalties that can harm the assets’ overall values.

Certain retirement accounts impose what are known as Required Minimum Distributions, or RMDs. These are the minimum amounts an account holder must withdraw when he or she reaches a certain age. Retirees aged 70 ½ years or older must withdraw minimum distributions from:

  • Traditional IRAs
  • 401(k) plans
  • Simplified Employee Pension (SEP) IRAs

If these minimums are not withdrawn according to regulations, such as taking out too little or mistiming the withdrawals, significant financial penalties may occur. For those with multiple retirement accounts, managing multiple distributions across accounts can be challenging at best or a recipe for financial disaster at worst. Income planning helps to avoid the penalties.

Taking RMDs is only part of the picture, however. A wise retiree may only withdraw the earnings from certain accounts, leaving the capital in place to continue accruing interest. This is a smart solution, yet many retirees run into difficulties with taxes. Taking too much out of any given retirement account, or taking distributions from multiple accounts at the same time can result in higher taxes; because these withdrawals are seen as ordinary income, one runs the risk of falling into a higher tax bracket. By carefully planning income amounts and distributions, one can avoid the excessive tax burdens imposed.

Income Planning Services by Balanced Financial

The financial experts at Balanced Financial know that retirement brings with it many challenges. For many, it is a time of excitement – allowing one to fulfill his or her dreams of world travel, relaxation, or spending time with family. For others, the financial headaches and uncertainty can lead to stress. Planning for retirement is difficult enough; add in the potential for taxes and penalties for withdrawing too much from retirement accounts and one can understand why professional help should be sought.

With the income planning services provided by Balanced Financial, clients can gain an understanding of what it takes to lead a stable and successful financial future. Income planning creates an easy-to-follow map, allowing for a steady stream of retirement income without the worry of higher taxes and financial penalties. By carefully evaluating each client’s unique financial goals and his or her needs, the income planners are able to offer best-in-class guidance and service. Take charge of your retirement goals by ensuring that you will have sufficient income for your expenses well into retirement. The income planning service that Balanced Financial offers is designed to give you peace of mind, knowing that you and your family will have a comfortable financial future.