Why You Need a Financial Planner More Than You Think

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Why You Need a Financial Planner More Than You Think

Do you think you have too little money to need a financial planner? My name is Evelyn, and I have worked with a personal financial planner for the past seven years. I want to tell you that even if you have only a small income and very little money, you can use the services of a financial planner. I'll explain how investing even the smallest amount of money can help you become wealthier over time. I'll go over investment strategies and let you know how to find the best rates for your situation. I hope I'll convince you that hiring a financial planner is a move that makes sense.

Planning Retirement Soon? When May You Want To Convert An IRA Or 401(K) To An Annuity?

Planning your finances for retirement can sometimes feel like playing a game of darts in the dark—the idea of predicting your expenses twenty to thirty years into the future can seem mind-boggling when you consider the cost of a gallon of gas or loaf of bread during your early working years. And while keeping your money invested in the stock market during an uncertain future can be nerve-wracking, putting your assets into cash now is a sure way to lose your nest egg to inflation. What can you do to provide yourself with a regular, risk-free monthly income in retirement? Read on to learn more about some situations in which converting your IRA or 401(K) into an annuity may make financial sense, as well as when you're better off keeping that money invested.

When does it make sense to convert a retirement account into an annuity?

The tax treatment of an annuity depends on the tax treatment of the funds used to purchase it—so for an annuity purchased entirely with pretax money (like a traditional IRA or 401(K)), the entire annuity benefit will be taxable, while annuities purchased with post-tax money (or a mixture of both) may be only partially taxable. It's important to calculate the taxes you'll pay on an annuity benefit before computing its impact on your monthly budget, as the amount you take home may be less than you expect.

It can often make financial sense to roll a smaller pre-tax account that doesn't comprise a huge percentage of your portfolio (like a 401(K)) from a former employer) into an annuity, as this can reduce the number of accounts you need to monitor while providing you with a nice boost to your monthly income. An annuity can also be a good way to supplement your Social Security if you're worried about higher expenses in retirement and want a higher guaranteed income than Social Security will provide.

When should you keep your IRA or 401(k) intact instead?

Because the personal income taxes at the top rates are currently much higher than the capital gains taxes assessed on investment gains, it may not make sense to purchase a large annuity that will provide an income that bumps you into the top tax brackets, as keeping this money in its current form can lower your taxes by double digits. It also rarely makes sense to use an account that doesn't tax gains or distributions (like a Roth IRA) into an annuity, as it's likely you'll wind up paying some taxes on gains that you wouldn't have paid had you kept these funds in your Roth.