brokersalliance.com The retirement income forecast is an extensive analysis incorporating both the anticipated foundation income needs and discretionary income desires for the length of the retirement duration, typically 20 or 25 year retirement model or to age 90. Assigning projected inflation rates to individual expenses or expense categories and adjusting for changes in expenses, such as mortgage payoff or reduction of travel as the clients grow older, is critical in retirement modeling. Converting after-tax expenses to pre-tax income requires those expenses to be paid at net. Some use assumed effective tax rate while others use marginal tax rates provided by the client.
Forecast reveals two income gaps. The first foundation income gap is the difference between needs and what will be provided by social security, pensions, and other secure income sources. This is the most critical gap that needs a solution. Annuities may be the primary solution to “need” gaps. The second is the total income gap, which is the difference between the total income goal and the income provided by secure income sources. When the gaps are revealed, the next step is craft a solution that will fill the gaps using retirement savings.
Steve and Jonathan unpack the foundational & discretionary components of retirement and map it out on a timeline.
Steve Savant hosts the weekly TV/Radio and Internet consumer talk show One for the Money as well as the daily Internet talk show, The Business Insurance Zone. Steve is a national financial columnist, blogger and money color commentator. Steve’s special guest is retirement expert Jonathan Illig.