How do you make decisions? Tools can be very helpful for simple situations -- and potentially less useful for more complex cases when more data has to be considered, as in the case of someone transitioning into retirement.

Consider this situation: Imagine you are a single person, age 60, with $250,000 of retirement savings, earning $55,000 a year and planning to retire in two years.

Say you were asked to focus on three key retirement issues: 1) Age at which you would claim Social Security from ages 62-70; 2) A general withdrawal progression (increasing, flat or decreasing) from retirement savings and whether you would like to take extra withdrawals from your retirement savings prior to claiming Social Security; and 3) Whether to purchase an annuity.

This was the case study presented to 400 participants recently by a team at UCLA and Cornell University. When the participants were divided into two groups and used a custom-built financial decision tool, the results differed based on how they considered the elements.

Group one, or the “separate condition,” assessed each of the three retirement issues one at a time as if each was an isolated decision. Each decision was independent of the others. For example, when to start Social Security was isolated from retirement savings withdrawal strategies and annuities. Participants saw the results of only one decision at a time.

As a result, when the participants selected a plan for withdrawals from retirement savings, they only saw the age when that money would run out, but nothing about the cumulative effect related to Social Security or an annuity.

Group two, or the “aggregated condition,” was permitted to take in all three aspects in a larger, big-picture context. For example, they were given the effect on the 60-year-old’s annual income from all sources. And, they saw the probability of having sufficient resources at the age of 85.

Intuitively, the second group had more data to deliver more holistic advice. That makes sense in the practical world of investment management that I can attest to. One would say that the bigger-picture approach wins probably in all cases, unless, of course, a single issue is all that needs to be addressed (for example, in this case study, the individual does not have a retirement plan or enough in savings to buy an annuity). That person can use a tool to isolate the Social Security timing question. In this case, the SSA’s calculator at tinyurl.com/b2wma32c can be very useful indeed.

With a set of tools that can take in a bigger picture for a more complex financial situation, one can better evaluate the financial trade-offs of each isolated decision point, as the study concluded. The study, “Broad Framing in Retirement Income Decision Making,” can be found at tinyurl.com/p2p8rjza.

Effective tools can be an important part of planning for (and living in) retirement. If you have any favorite online tools, email me at readers@juliejason.com and your suggestions may be discussed in a future column.

On another note, I invite you to attend a virtual talk I’m giving at the Greenwich Library, “Giving to the Next Generation,” on Wednesday, May 5, at 1:00 p.m. EDT. To register, go to tinyurl.com/y29wzrwv or email Yang Wang at ywang@greenwichlibrary.org.

If you are interested in 401(k) investing, I will be giving a series of short virtual talks on “How to Be a 401(k) Champion®.” For the schedule, see www.juliejason.com/events.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

Even though tax day was delayed this year to May 17 from April 15, I’m guessing you may be thinking about your tax return, or about proposed changes to the tax laws. So, I thought I’d share a few thoughts from influencers to put a few things into perspective. You may recognize some of these luminaries:

“The hardest thing in the world to understand is the income tax.” -- Albert Einstein, physicist

“Like mothers, taxes are often misunderstood, but seldom forgotten.” -- Lord Bramwell, 19th-century English jurist

“I am proud to be paying taxes in the United States. The only thing is -- I could be just as proud for half the money.” -- Arthur Godfrey, entertainer

“The power of taxing people and their property is essential to the very existence of government.” -- James Madison, U.S. president

“To tax and to please, no more than to love and to be wise, is not given to men.” -- Edmund Burke, 18th-century Irish political philosopher and British statesman

“People who complain about taxes can be divided into two classes: men and women.” -- Unknown

“Taxes are what we pay for civilized society.” -- Oliver Wendell Holmes Jr., U.S. Supreme Court justice

“No government can exist without taxation. This money must necessarily be levied on the people; and the grand art consists of levying so as not to oppress.” -- Frederick the Great, 18th-century Prussian king

“The best measure of a man’s honesty isn’t his income tax return. It’s the zero adjust on his bathroom scale.” -- Arthur C. Clarke, author

A tax loophole is “something that benefits the other guy. If it benefits you, it is tax reform.” -- Russell B. Long, U.S. senator

“Few of us ever test our powers of deduction, except when filling out an income tax form.” -- Laurence J. Peter, author

“Taxation with representation ain’t so hot either.” -- Gerald Barzan, humorist

“Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.” -- Plato

“Income tax has made more liars out of the American people than golf.” -- Will Rogers, humorist

These quotes are posted on the IRS website at tinyurl.com/b5vcbv3f. If you have never visited the site, let me encourage you to do so.

You’ll also want to check out the IRSvideos YouTube page at tinyurl.com/b5pfj3d6, where you will find helpful informational videos on just about any tax topic you may want to learn about, including videos in Spanish.

Here are a few that I recommend:

If you have not received your Economic Impact Payment, watch the video that helps you sign up for an IRS account online called “IRS Economic Impact Payments on Your Tax Account” at tinyurl.com/9xjdarr4.

For a basic grounding in tax filings, see “Help for Taxpayers” at tinyurl.com/t59tcprv.

If you need help on withholding, see “How to Use the IRS Withholding Estimator for Paycheck Checkup” at tinyurl.com/2cctus3d.

If you’ve been the victim of identity theft, watch “Get an Identity Protection PIN” (to keep someone else from using your Social Security number to file a tax return) at tinyurl.com/3szb5tck.

If you are due a tax refund, see “When Will I Get My Refund?” (tinyurl.com/9jhxyjec) and “Refund: Claim It or Lose It” (tinyurl.com/cx6cdyx4).

And, finally, if you are interested in working for the IRS, watch “Revenue Agent” at tinyurl.com/3uxd6eez, as well as “What Does A Special Agent Do?” at tinyurl.com/yjjv65ur and “Your Abilities Work at the IRS” at tinyurl.com/2svzcxy2.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION

As a proponent of financial literacy, I am always interested in how people are doing when it comes to saving and investing for retirement.

A recent survey by Fidelity, one of the largest asset managers in the world, provides some insights that I’d like to share.

The “2021 State of Retirement Planning Study” highlighted some challenges when it came to financial knowledge.

Far too many of those surveyed (28%) believed that financial professionals would recommend a withdrawal rate from retirement savings of 10% to 15% a year.

Those of you who are longtime readers of this column would not fall into that cohort. But those who do would find themselves in jeopardy of running out of money unless they had very short retirement horizons. If you would like more information about safe withdrawal rates for retirement, I cover the topic in detail in “The Retirement Survival Guide,” along with tools to use to help you run your own numbers.

Another area of concern is Social Security’s “full retirement age” (FRA). Only 17% of the respondents knew their correct number.

While you can start getting Social Security retirement benefits at 62, that means you’ll receive a permanent reduction in your monthly payments. Forty-four percent of Generation X, the age group between 41 and 56 years old, underestimated their FRA -- that doesn’t help when you’re trying to plan for the future.

According to the Social Security Administration (tinyurl.com/4ujbfvyv), the FRA for people born between 1943 and 1954 is 66. For those born between 1955 and 1959, it’s between 66 and 67, depending on the year. If born in 1960 and later, the FRA is 67.

Another misconception had to do with stock market returns. Seventy-two percent of respondents said they believed the stock market had seen negative returns more frequently than positive ones over the past 35 years. Not so. As Fidelity reported, the stock market has had a positive annual return for 26 of the past 35 years.

What about how much money you need to have saved before retiring? Based on the last year of working income, half of the respondents said the figure should be five times or less the final year’s income. Not enough. Only 25% selected the ideal recommendation of having 10-12 times your last full year of working income saved by the time you reach retirement.

Only 33% of respondents have a plan in place to achieve their retirement goals. I can tell you that’s not good enough. Retirement can last 20, 30 or even 40 years. Just think of retirement as a business that needs to thrive for decades. Without a plan on how you will do that, you’re deciding to roll the dice. Why would you want to do that? Do you think of yourself as a gambler?

Another 31% of respondents thought “in great detail” about how they would afford retirement. Well, that’s a start. But again, not good enough.

We have to face the fact that you, only you, can secure your retirement -- you can get help, of course, but it’s up to you to seek it out. That’s why I’m such a believer in financial literacy education. It’s no longer merely a good thing to have. It’s mandatory for anyone of any age who wants to retire someday.

Fidelity’s national online survey, conducted in February, consisted of 1,204 “adult financial decision makers” who were not retired and had at least one investment account. You can see more about the study at tinyurl.com/s5b8txwu.

If you want to engage in a dialogue about how to handle the planning process, write to me at readers@juliejason.com.

On another note, if you are interested in the basics of retirement planning, join me for a virtual presentation, “Plan for Retirement Account Withdrawals.” It will be held on Wednesday, April 21, at 1 p.m. EDT, and is sponsored by the Greenwich (Connecticut) Library. To register, go to tinyurl.com/y833adhm or contact Yang Wang, 203-622-7924, ywang@greenwichlibrary.org.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant Investment Advisers Inc. of Stamford, Connecticut) and award-winning author, welcomes your questions/comments (readers@juliejason.com). Please visit www.juliejason.com.

DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION