What is asset-location planning and is it important?

Imagine you have a Roth IRA, a 401(k) at work and a brokerage account. A fairly typical situation these days. You are 65-years old and ready to retire. Time to turn your nest egg into income!

A "master inventory" of your three accounts shows that they total $250,000 in value and that you have 25% of your money in no-risk investments, 25% in bonds and 50% in stocks.

For the sake of example, let's assume that you have a "neighbor" that is your age and also ready to retire.

Your "neighbor" also has $250,000 in the same three type accounts with the same mix of stocks, bonds, and no-risk.

In retirement you and your "neighbor" use your nest eggs to supplement Social Security and pensions. Each of you during your best to both enjoy your retirement and not to run out of money.

You do a lot better than your neighbor.

In retirement, your $250,000 in retirement savings produces over $100,000 more in income for you to enjoy and you leave your heirs almost $60,000 more than your "neighbor".

What gives? What allowed your nest egg to do so much better?

It was because you had the right accounts, in the right amounts, and you used them in the right order. The attention to detail gave you more money to spend every month and that is a great thing.

You made sure to minimize your tax bill by placing your high-income investments in tax-deferred accounts.

You placed your longest-term investments into your Roth IRA.

You used strategies to guarantee a minimum income for your entire life.

You made sure that every dollar in your nest egg was working as hard as possible.

You withdrew your money in retirement in the right order to maximize your income for your entire retirement.

Some financial planning skills can be easily learned. Retirement income planning is not one of them.

It is a rare day when we cannot improve someone's Retirement Income Plan.

Let us send you a sample Retirement Income Plan. Send an email to Info@SeriousMoneyOhio.com and ask for yours today.