Income

If your retirement goal is to step away from full-time work in your 50s or even earlier, the most important step is ensuring you have a paycheck replacement.

Despite the effects inflation and volatility can have on retiree income, new research through Morningstar suggests a “safe starting point” withdrawal rate for new retirees in 2023 is 3.8 percent, up from 3.3 percent a year ago.

While your taxes could be lower in retirement than your working years, the reality is, the more income you have, the more taxes you will owe. The first step to mitigating the amount of dollars that go to Uncle Sam is understanding what income is taxed and how.

Here, past podcast guest, Wade Pfau, highlights how to strategize the withdrawal order between your three tax buckets (taxable, tax-deferred, tax-exempt) by utilizing two different distribution methods: The adjusted gross income (AGI) threshold strategy versus the incremental average tax rate method.

In this article, two of my favorite retirement researchers, past podcast guest Wade Pfau and Alex Murguía, highlight what is known as the RISA (Retirement Income Style Awareness) Framework. This profile is created by pinpointing the two strongest factors that determine your overall income preference style.

To determine if you are a constrained investor, you would calculate the ratio of your minimum annual living expenses to the value of your net investment assets. If the outcome is more than three percent, you could be classified in the constrained category.

Bucket strategies are immensely popular in the realm of retirement planning strategies, but as with any financial approach, they have their naysayers too.

The “bucketing” manner in which you might account for income and assets, as well as the hierarchy it develops, can cause you to save more money for retirement than you actually need.

A primary part of navigating the complicated process of tax planning includes not only considering the source of your income, but also understanding how it can affect the dues you owe Uncle Sam.

This article hones in on utilizing actuarial methodology when it comes to determining how much you can afford to spend in retirement – specifically, through the floor-and-upside approach.

The odds are in your favor when it comes to living longer; however, that also means creating a retirement income stream you don’t outlive is more imperative than ever.

If you had a crystal ball, retirement planning would be much less complicated. Unfortunately, no such thing exists, but there is one thing you can do, which is stress test your portfolio.