I retired several years ago and took a lump sum payment from my pension, and I am not yet withdrawing Social Security. As a result, I don't have a traditional fixed income. Instead, my income consists of dividends, interest, and any investments I liquidate. If asked for my income -- say, by a credit card company -- what is the correct answer? Should I report the AGI on my 1040 (which is distorted by a traditional-to-Roth IRA conversion, with capital gains largely offset by capital losses)? My dividend and interest income? Or the 2.5% of my net worth that I am comfortable liquidating each year? --M.E., Port Ludlow, Wash.
The answer to this question will depend on the company requesting the information, says Annapolis financial planner Ted Toal. So in most cases, it's going to behoove you to get someone on the phone and explain the situation: That you're retired and don't have normal sources of income, but that you have plenty of assets.
Generally, you'll be asked to list the income that you have reliably coming in, says Toal. That means excluding the Roth conversion and other one-time sources of income from the equation, and even excluding investment liquidations that are offset by losses on your tax return. "A lot of times, in this type of situation, lenders will want to look at your assets," Toal says. "They're going to ask that you provide complete verification of all that you have."
--Kate Ashford
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