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How to Approach Concerns About Income

When you think about notable events in 1978, you may recall the first superhero film “Superman: The Movie” staring Christopher Reeve and Marlon Brando. Or perhaps you recall the tunes of that classic Bee Gee’s album “Saturday Night Fever” that held the #1 spot for a staggering 24 straight weeks. I would imagine many retirees remember those two events. However, one event that may not be as easily remembered was when Congress passed the Revenue Act of 1978.

You may be asking, “Jason, honestly, who cares?!” It just so happens that in regards to retirement planning, this legislation could arguably have affected retirees more than any other single piece of legislation in our lifetime. I understand, that is a bold assertion so let’s unpack it a little.
After the passage of the Revenue Act of 1978, a benefits consultant named Ted Benna interpreted this act in a manner that allowed for the creation of the 401(k) retirement account.

The 401(k) account eventually became the staple of retirement benefits, essentially cannibalizing the traditional pension. By giving employees 401(k) accounts instead of pension benefits, employers shifted the risk from their shoulders, to the employee’s shoulders.

That is why I made my bold assertion. However, please don’t feel as though all hope it lost, it most definitely is not. All it means is that retirees need to plan strategically so that they do not run out of money. Here are a few tips for retirees to consider about their income planning.

Taxes – The dreaded word. None of us want to pay them. While working with a financial planner and a tax professional/certified public accountant, retirees will want look at both their tax liability today as well as in the future. With the Tax Cut and Jobs Act (TCJA) there are many beneficial strategies for retirees to consider. The more we save in taxes, the more income we can have today and in the future.

Inflation – This is simply a fancy word to describe the fact that goods(cars, milk, computers) and services(physicians, mechanics, plumbers) will cost more in the future than they do today. This has always been a factor to consider however it has become even more relevant due to the fact that our government is increasing our federal debt at a breakneck pace. Retirees want to make sure their income plan accounts for inflation so that they can keep their preferred standard of living.

Longevity – Or you could also say sustainability. We want to make sure our income and assets will outlive us. This requires complex planning that takes into consideration Investments, Taxes, Healthcare and Legacy. To have confidence in our income plan, we need to take all of these elements into consideration and then we need to stress-test it. That is how you know your heart is in good shape for the long haul, you get a stress-test. Retirees should do the same with their income plan.

I would like to say that I don’t want to make Mr. Benna out to be the bad guy. He was a very intelligent and innovative man however the domino effect of his ideas have forced retirees to become very intentional about their financial planning. That responsibility can be scary and overwhelming.

If you would like an experienced financial professional to help guide you through a clear and simple process, we look forward to helping in any way that we can 863-304-8959.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and J Biance Financial are not affiliated companies. 672928-07/20