The details of a new provision regarding Required Minimum Distributions from IRAs and other similarly configured qualified retirement plans approved by Congress in 2012 were finally defined by the Internal Revenue Service in July 2014. And while it seems like two years is a long time to determine how to tweak existing tax policy on retirement accounts, remember: it’s going to be complicated.
When the discussion turns to retirement planning, two prominent factors, age and dollars, are typically front and center. Determining the age at which one would like to retire, and the amount of money that will be needed to make retirement feasible are reference points to determine projected annual rates of return, and the amounts that must be contributed in order make a plan work. In theory, this approach brings focus to your financial objectives, and moves you toward a profitable outcome. But what if the decision to retire doesn’t hinge on these factors? Empirical observations and comprehensive surveys strongly suggest that “real-world” factors are much more likely to trigger a decision to retire, regardless of whether one’s financial objectives have been met. Consequently, it might be more accurate to say many Americans won’t choose when to retire. Instead, these other non-financial issues will make the decision for them.
One of the biggest challenges in designing financial programs for individuals is their individuality. People have different skills, needs, interests, objectives and current circumstances; personalized financial planning is a micro issue. And every plan is unique. In contrast, governments and financial corporations operate on a macro scale. Their financial perspectives, issues and strategies are quite different than individuals’. Institutions don’t interface with individuals in a one-on-one format; their relationships are shaped by demographics and transactions with large numbers of people. So how do institutions shape their programs, products and services to respond to individual needs and preferences?
No matter how many years you’ve worked, there’s not going to be a monthly check waiting in your mailbox unless you’ve built up an accumulation to fund it. The responsibility to save is on you. But in the process, many Americans may find it to their advantage to transfer some of the responsibility for generating retirement income to insurance companies. Going forward, more retirement discussions are likely to include strategies that replicate a pension, i.e., a stream of lifetime income payments, using annuities or similar instruments. Sometimes the most responsible option is transferring the responsibility to those best-suited to perform the task. And insurance companies are well-equipped to deliver guaranteed benefits.
Financial planning success begins with building a solid plan for the future. Your team of professionals at Insight Alliance of Tennessee focuses on designing the optimal plan to achieve success as you define it. We believe that our customized financial planning process along with asset management alternatives and extensive analysis of the markets will position you for a clear path to prosperity.
“Planning for the unexpected” seems like a clichéd oxymoron of risk management. (Because if an event is unexpected, how can you plan for it?) The more accurate statement about risk management for most Americans is that we attempt to plan for things we know can happen, but occur infrequently. But because we can imagine what might happen, we also sometimes act as if we can anticipate or avoid these infrequent occurrences, taking precautionary measures (like buying insurance) only when we feel it is absolutely necessary. Do you have the maximum insurance for your assets, income, health, and Human Life Value?