Full Analysis: Retire Immediately with $1M in Roth and Traditional IRA’s

(don’t forget to check out the video of this analysis)

65-year-old woman who wants to retire immediately

Goals:

1. Retire comfortably with approximately 90k/year of retirement income (not counting social security)

2. Ensure that you create an effective retirement income plan

3. Not particular concerned with diversification with your investments and see opportunity in undervalued stock like Apple (want money to stay in apple stock)

Financial Info:

Total Retirement Assets = $2,000,000 (not including home equity)

• Asset Breakdown: $1M Roth IRA, $1M Traditional IRA
• Other Assets: social security, home equity ($1M+)

Safe Money Target:

Approximately $1,200,000 (60%) of current retirement assets somewhere safe & not susceptible to market losses

Safe Money Allocation & Income Strategy:

• ($848,000) — Income annuity contribution Traditional IRA (see Retirement Income Analysis below) generates approximately $63,648/year of guaranteed, lifetime income immediately
• ($352,000) — Income annuity contribution with Roth IRA (see Retirement Income Analysis below) generates approximately $26,352/year of guaranteed, lifetime income immediately
• Assets to Remain Invested in the market: $800,000

Retirement Income Analysis

First, we are going to leverage an insurance company to provide maximum, guaranteed, lifetime income.

This provides many benefits, including:

• Income withdrawals not susceptible to fluctuations of the market
• Completely eliminates the sequence-of-return risk for your retirement income
• Helps generate more income than you can from the market with the 4% rule (significantly more)
• Eliminates the possibility of running out of money in retirement
• Allows much more freedom & flexibility with your remaining assets (since you are using less of your money to generate income)

Comparing the Top 3 Companies on the Market (income taken immediately)

#1 SSL — Sentinel Security Life (Summit Bonus) $91,080/year

• B++ Rating
• Highest income

#2 Nationwide Peak 10 $90,000/year

• A+ Rating
• Most potential for preservation/growth of contract value (highest index rates)

#3 AIG — AIG Insurance Company (Power Select Plus Income) $88,800/year

• A/A+ Rating
• More potential for preservation of account value (higher index rates)

Tax Considerations

Estimated Taxable Income in Retirement = $90,000 (not counting social security)

• $14,600 standard deduction (+ $1950 additional deduction) taxed @ 0%
• $11,600 taxed @ 10% = $1,160 annual federal tax
• $35,550 taxed @ 12% = $4,266 annual federal tax
• Taxable Income Target from Traditional IRA Funds = $63,650 per year (will satisfy RMD)
• Tax-free Income Target from Roth IRA Funds = $26,350 per year
• Estimated Annual Federal Tax = $5,426

Total estimated effective tax rate = 6.03%

Remaining Assets (beyond fixed income):

• $800,000 in the market (growth money, susceptible to market fluctuations, but can truly be geared for aggressive growth since we already have enough fixed, guaranteed income)

My Recommendations:

Use (2) indexed, income annuities based on Retirement Income Analysis for future, guaranteed income ($90,000 of fixed, guaranteed income immediately)

• Approximately $848,000 into Traditional IRA & $352,000 into Roth IRA to achieve an effective tax rate of just over 6% in retirement with maximum, guaranteed income AND maximum flexible and market growth exposure