At some point in each of our lives, we will be faced with a situation whereby we will have to provide for and manage our own income. For some people this happens sooner than it does for others. The self-employed, the disabled or those who are unfortunate to be laid off know what income management is all about. But for the majority, income management is a foreign concept. Yes, many of us have budgets and manage a checkbook, but these tasks are relatively easy compared to having to manage your own income.
The 2000 census showed there are 30 million people in our country over age 65. There are some 76 million people over age 50 and by the year 2020 there will be over 115 million people age 50 and older. Age 50 is pivotal because this is the time when most people really start thinking about retirement, when people take stock of their assets, when key questions come to mind regarding their own finances. People tend to think in terms of quantity of funds as opposed to the income potential of one’s assets. When one nears retirement, or is faced with one of the other situations that require personal income management earlier, people all of a sudden get fearful of where their funds will come from in order to live.
This shouldn’t be the situation. It is no mystery and the day where assets are consolidated into CDs or Bonds so as to protect principal should now be history. Investors today have become very educated and diversified. Historically, the stock market remains one of the better performers in terms of returns. So, as individuals, each of us need to become comfortable and informed with regard to our assets and
income potential. While there are considerations associated with some assets, such as withdrawals from Qualified Investments, and tax issues associated with most income, the individual can find tools available in the marketplace that can ease the fears of income management.
Income management is composed of a number of components. These include the income producing asset, the income itself, rules or regulations regarding an income source and any liabilities that might accompany the income. In some cases, income management may be augmented by reduction of principal of some assets to make up for income shortfalls. In most cases, the individual must become knowledgeable with each income source and understand how to get at the income, in what form, on what schedule and understand the reliability of the source as not all income sources are guaranteed
forever.
While each person will differ in asset and income composition potential, a balanced income management plan is probably the best way of ensuring sufficient funds are available for the needs of today and the future. Laying out an overall income stream that includes interest income from money market funds, bonds, CDs, and savings accounts; income from stock and mutual fund dividends; income from wages, gambling winnings, rents, business income and partnerships; income from annuities, pensions, 401ks and social security should provide a balanced income stream capable of surviving any one asset’s possible downturn. Withdrawal of a portion of a lesser performing asset can be utilized to supplement income when needed should the need arise.
Most individuals have had their primary income needs provided by their employer. In the future, the individual has to be prepared to do the tasks formerly done by the employer. This includes knowing any rules and regulations pertaining to Qualified Assets and understanding the tax implications associated with income. It also includes getting the income so you have it to spend. It might sound basic, but even having a simple dividend declared, and then getting the funds into your own checking account takes time and coordination.
While most people don’t think about the topic of income management, every person should become familiar with their own assets, the rules associated with their assets, and with the income capabilities associated with each asset. Some assets such as buildings and land require lead-time in order to liquidate. If you are a person who wants to be in control of your financial situation when one of the events takes place where you have to manage your own income, there is no time like the present to begin becoming your own income manager.
Mr. Jersey is the General Manager for 2050 Systems,
LLC.
2020 Systems, LLC is a provider of Income Management
Applications Software for Consumers. For more
information
visit www.2050systems.com or visit Mr. Jersey’s
retirement information site at
www.someonesgottadoit.com.
