Thursday, August 22, 2013

Explore the Ed Slott Retirement Rescue Plan

On several occasions in this blog I have mentioned the fact that many Baby Boomers are not prepared for retirement.  I frequently encourage people to postpone their retirement as long as possible in order to maximize their Social Security.  I have also given suggestions to help readers find a fun retirement job.  However, for most people these actions will need to be supplemented with at least some retirement savings.  This reality may be discouraging to those of you who know that you have not done enough financial planning.  Fortunately, for most of us it is not too late to turn things around, protect our assets, and have a more financially secure retirement.  With just a little information and a few simple steps, you can get started on the road to a better retirement.

Ed Slott is a highly respected investment advisor, CPA and IRA specialist who was recently featured on PBS in a program called "Retirement Rescue."  In this televised program, he outlined what people should be doing in order to have a financially secure financial plan for retirement.  Listed below are some of the suggestions he has, as well as a link to Ed Slott's books from Amazon.  It wouldn't be fair to review his ideas without giving you an opportunity to buy his books directly, so he can profit if you decide to use some of his advice.

Avoid Taxes

No matter how much or how little you have saved towards retirement, you want to make sure you get to keep as much of it as possible.  Ed Slott recommends that you make a plan to minimize the taxes you will pay after retirement.  You don't want to give the government any more money than necessary.

Move you money from accounts that are taxed to accounts that will not be taxed.  Yes, it really is possible!  In fact, I've made this same suggestion in my blog in the past.  My husband and I recently moved our investments from a traditional IRA to a Roth IRA.  We paid taxes on the value of the investments we currently have in the account.  However, the investments we have can now grow and, when we withdraw the money in our 70's, we will not have to pay income taxes on our withdrawals.  In other words, we paid taxes on our retirement assets now so we won't have to pay taxes on them later ... which is exactly what Ed Slott recommends.  There is a waiting period before we can can begin to withdraw the profit on our retirement savings, but it is worth it to us.

Another advantage of the Roth IRA is that we will not have to begin withdrawing the money as soon as we turn 70 1/2.  Our money can continue to grow tax free until we want to withdraw it.  There are no mandatory withdrawal rules.

Mr. Slott also says that another way to reduce your taxes is by purchasing permanent life insurance.  There is a federal tax exemption for the proceeds of a life insurance policy.  This is a major benefit for your dependents, and can be particularly helpful for a spouse who is left behind when the breadwinner dies.  Mr. Slott believes that permanent life insurance is an investment.  The money that is paid in premiums grows tax free and you can tap into the value, while you are still alive, if you need the funds to help fund your retirement.  Whatever is left becomes cash to help support your dependents.  If you decide to buy life insurance for this purpose, make sure you are buying permanent life insurance that builds a cash value.  It costs more, but it can benefit both you and your heirs later on.  Since I am no insurance expert, you may want to read one of Mr. Slott's books in order to be certain your fully understand this option.

Minimize Your Investment Risk

Mr. Slott also believes that the majority of people should not rely on the stock market for their investments.  It is much too volatile and unpredictable for people who are retired or near retirement age.  He points out that far too many people lost a substantial amount of their retirement savings in the last stock market decline.  Consequently, he recommends that people put some of their money into annuities that will give them a guaranteed stream of income for the rest of their life.

One suggestion he has that intrigued me is to buy annuities in a Roth IRA.  This will provide a guaranteed income stream that is tax free!  He also points out that it is important that you use a reliable, well-known annuity company and respected money managers when you choose an annuity.

I have to note that annuities are one area that is controversial.  Some retirement specialists believe in annuities and others strongly believe that they are a bad idea and that you can do better if you invest your money conservatively in dividend paying stocks, government bonds or similar investment products.  You will want to consult your own investment adviser (or perhaps several) before making a final decision on which investment instrument is the best way to provide you with supplemental retirement income.  Some advisers recommend finding funds that pay dividends and also allow your principle to grow. 

A Better Approach to Saving Money

We all like to save money and this desire may cause some people to be reluctant to spend money on their retirement planning.  However, now is the time to spend the necessary money needed to invest in your retirement.  Pay taxes now; buy life insurance; buy annuities or invest your money in funds.  According to Mr. Slott, it is important to spend some money now, so that you can have a much larger retirement income later.

Reduce Uncertainty

We all want to avoid uncertainty about our future financial security.  Ed Slott points out that following his program will reduce or eliminate the amount of insecurity and uncertainty you will have about your financial future.  If you follow his recommendations exactly, it is true that you will have avoided uncertainly by avoiding taxes and buying annuities.  You will know exactly how much your assets are worth and how much income you will have.  This is why he says you can rescue your retirement by simply following his suggestions.

Avoid Inactivity

Finally, Ed Slott also says that one of the worst killers of retirement planning is inactivity.  If you don't take any of these steps to protect your assets and rescue your retirement, the inactivity could result in disaster.  The sooner you begin to take at least some of the steps mentioned above, the better your results will be.  No matter how old or young you are, everyone should sit down and make a plan that will maximize the amount of retirement income they will have after they retire.

Where to Get More Information

You will almost certainly want to get more specific information on how to follow this investment program if you decide to give it a try.  If so, you can use this link to order Ed Slott's Retirement Rescue books from Amazon.

Obviously, I cannot include all of the details of his plan in this blog post ... and it wouldn't be fair to Mr. Slott if I did.  However, I have found his advice to be so thoughtful and helpful that I wanted to be sure that my followers knew about it.  The whole goal of this blog is to make sure that as many people as possible have a satisfying, comfortable and fun retirement.  Financial insecurity will go a long way towards making sure that happens.

In addition, you may want to get information on other retirement issues by checking out the index articles below.  Each one contains links to a number of related articles on that topic:

Gifts, Travel and Family Relationships

Great Places for Boomers to Retire Overseas

Great Places to Retire in the United States

Health and Medical Topics for Baby Boomers

Money and Financial Planning for Retirement


You are reading from the blog:  http://baby-boomer-retirement.blogspot.com

Photo of Ed Slot courtesy of www.en.wikipedia.org/commons

2 comments:

  1. Great information. I wasn't aware of the tax issue with permanent life insurance. Good to know!

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