Happy Easter Weekend! Our mission at ETFMathGuy is to educate investors seeking tax-efficient investing and financial plans. So, we continue to provide online access to algorithms that determine tax-efficient retirement income based on our award-winning published research. Today, we are happy to announce that part-time work income is now included, another new feature requested by financial services professionals. Now, retirees and financial advisors may provide additional part-time work income to represent how many individuals and their spouses may wish to transition into retirement with wage income. Therefore, we hope this new feature will better support our users as they navigate this optimal decision-making process.
Adding part-time work income to an optimal retirement income plan
Unregistered users can access these new inputs in the same group of inputs as social security and pension income. Registered users can also add assumptions about part-time work to their plan using the comprehensive profiles page. Accordingly, the retiree and spouse each have three inputs in their financial plan, which appear under Other Income Sources. The image below shows these values for a hypothetical retiree planning to work part-time, earning $50,000 in the plan’s first year, with the amount decreasing by 30% each year for the next five years.
For this retiree, this plan reduces income by 30% per year, so that in year 2, part-time work income is $50,000 – 0.3*(50,000) = $35,000. This 30% annual reduction occurs until year 6, when there is no longer any part-time income. Similar inputs are available for a spouse, if applicable.
Observing part-time work in the retirement income plan
The image below shows how part-time work income affects a retirement plan using the Common Rule.
As this image shows, the light blue region now includes part-time work. This bar chart groups these sources of retirement income, as they are all taxed as ordinary income.
New feature summary
In conclusion, retirement plans often need to include part-time work, since not all retirees make an immediate transition from full-time work to retirement. We hope this recent enhancement helps bridge the gap so users can better understand how portfolio longevity or bequests may improve with tax-efficient decision making. Also, Contact Us if there are additional features you wish to see in our tax-alpha retirement income calculator.
