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Jim Lentini: Retirement road map, part two

Business Commentary

Posted: January 10, 2011 10:50 p.m.
Updated: January 10, 2011 10:50 p.m.

Last week, my article covered the retirement road map for people who reach the 50s age bracket, a period that should be dedicated to “accumulation and protection.”

Part two covers the 60s, which is planning the distribution of accumulated assets at retirement.

As you transition from working toward retirement, you want to make sure to have a solid spending strategy and know your Social Security options.

Working with your financial adviser, you should consider reviewing and adjusting your asset mix to reflect your proximity to retirement, and you should do the following:

* Evaluate your current debt management strategy. Certain types of debt, such as a mortgage, may help reduce expenses during retirement, due to potential tax benefits.

* Review your options when it’s time to take income from your retirement accounts.

At age 59 1/2, withdrawals can be made from many retirement plans and IRAs without incurring an IRS penalty. If you are still working, but want access to your money, consider an in-service withdrawal from your employer-sponsored retirement plan.

Most retirement plans define normal retirement age as 65 and allow access to retirement accounts even while employed.
* Keep in mind that if you have worked to the normal retirement age for your Social Security benefit, you can earn as much as you want, and still receive your maximum SSI benefit.

However, be aware that if you earn too much money, according to a recent change by Congress, you will be surcharged for your Part B premium, and it will be deducted from your SSI income.

When beginning withdrawals from retirement accounts, withdrawals come first from any contract gains, and can reduce the death benefit, optional benefits, and contract value.

Taxable distributions are subject to ordinary income tax and, if made prior to age 59 1/2, may also be subject to a 10 percent federal income tax penalty. Certain qualified retirement plans require distributions to begin by age 70 1/2.

Now that you are in your 60s, you begin thinking about how hard you have worked to save as you close in on that retirement date.

It’s a good time to ask yourself how to start spending your savings without exhausting your savings?

One of the best ways proven today is a variable annuity with a guaranteed withdrawal benefit.

It will allow you to increase your income potential in an up market while helping protect assets in a down market.

You can establish the amount of annual income you can take, and then guarantee it for life. And you protect assets from probate and have a plan for successor beneficiaries.

If you consider the VA option when discussing your retirement plans with your advisor, be sure he or she explains the different options available (only 31 major companies can offer GWBs because of the reserves required by law).

Also, now that you are getting close to retirement,  be sure to review your Social Security options of taking early benefits at age 62 (80 percent),  full benefits, age 65-70 (100 percent) or delayed income, up to age 70 (127.5 percent).

Your specific needs and circumstances will determine your best options of taking income with your expected future expenses.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investments Inc. He can be reached at (661) 254-7633. His column reflects his own views and not necessarily those of The Signal.


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