Thinking about Income while Filing your 2020 Income Taxes?
Thinking about Income while Filing your 2020 Income Taxes?
Coordinate Life’s Voyage Accordingly!
Hello Hello!
One of my favorite WMGNA-isms “There are two things you can do with money, spend it now or spend it later….that or have someone else “spend it” later… if you do not make it “till later” ”. So, as we power to the April 15th tax deadline and the end of 2020 tax season (recently extended to May 17th), I got to thinking about income.
Hmmm… Silly Me, Income and Taxes?
Different income is taxed at different tax rates. For those of you who are working and getting wages, those are taxed at a certain rate, while capital gains at a certain lower rate, and some income is even tax free! If you're still working, your primary income most likely comes from wages. However, those of you who are no longer working still need an income.
So How Do We Provide an Income Without Working?
This is often referred to as retirement income. How is retirement income generated you might ask? Back in 1995, we retired the word "Retire" and replaced it with “Restyle”. There are many ways to come to a point where you have reached critical mass; where you have saved enough money to provide a monthly income that allows you to not rely on having to work anymore. For the majority, Social Security starting as early as age 62 provides us with some income. In addition, you may also have a pension plan from an employer where a check is sent. However, those are few and far between. This then goes back to tapping into your savings. Almost everyone has a 401k, where you have accumulated a preponderance of your retirement income. Though again, a 401k does not provide a check every month. The option is to buy an annuity where you give money to an insurance company and in return, they give you a check that you cannot outlive. What we have seen since 1995 is that folks are often unclear when it comes to spendable monthly income….after-taxes. Mainly the question of “how much money do I need, and how long am I going to need it?”. Behavioral finance says that almost all of us underestimate our mortality. For example, the average life expectancy of a couple that is 65 is 91, meaning at least one will surpass 91. That is the average folks! That is why inflation and the cost of living should be considered. For example, if you presently need $10,000 monthly spendable, after-taxes, you surely do not want that same ten thousand after-taxes in twenty years. Historically every 18 years your $10,000 monthly will encounter a 50% reduction due to inflation; meaning your current $10k/month will be worth $5k. So, while you are filing your 2020 income tax return it is an opportune time to be thinking about your plan for where your income will come from when you decide to stop working.
A Well Thought Out Retirement Income Plan, Springs from:
1.Candid/Frequent Communication
2.Goals/Objectives
3.Cashflow/Taxes
4.The Ability to Handle Risk/Emotion
The more time you have to plan, your likelihood of a positive outcome increases! Whether you are an existing subscriber and want to re-review your Restylement™ income plan, or just a friendly reader who would like to chat about your Restylement income plan (or lack thereof yikes!), simply let us know.
Talk soon and keep the faith.
-Dan
