Make Your Clients Money Last Through Retirement

According to the AARP, men and women who reach 65 are expected to live to 82 and 85. Planning for a long retirement is challenging. Below are some basic tips that take the guesswork out of planning and will leave your clients feeling empowered.

When planning for retirement, several factors should be taken into consideration. First, ask about their health. Will health care costs likely to be high down the road? How many years do they plan to be retired? It is better to overestimate. Think about the expense to maintain the lifestyle they desire. What are their sources of retirement income and how much do they each total? Some of the best sources for this type of income include Social Security benefits, pension funds, savings and investments, work and inheritances. Take into account the possibility of a need for long term care (ask about LTC alternatives). Remember to plan for economic variables, such as inflation, property values, interest rates and taxes. It is very important to understand investment risks, as well.

The National Endowment for Financial Education offers the following advice for financial planning that will best serve long term needs:

·     Diversify your assets. Experts recommend dividing assets between stocks, bonds and cash, but diversifying within each of the categories.

·     Don’t be too conservative in their investments. It is important to have a balance between making assets last and helping them grow.

·     Set a withdrawal rate and make annual adjustments for inflation and investment performance. To extend the life of a retirement portfolio, begin with a withdrawl rate of no more than 4 percent of total retirement assets, including an annual increase tied to the rate of inflation in following years.

·     Decide when to begin receiving Social Security. Client may elect to postpone benefits until full retirement age, or later, to get larger monthly payments.

·     Build a cash buffer to cover three to five years of living expenses. Savings should include liquid assets, like a money market account. This safeguards against having to sell equity investments in a down market or having to claim Social Security before they really need it.

·     Make adjustments along the way. Re-evaluate progress once a year. When the market changes or inflation rates vary, might need to make changes to where assets are.

·     Consider annuities. These guarantee a monthly stream of income either for a specific period or for life. The downside, however, is that fixed annuities do not keep up with inflation. Variable annuities safeguard against this, but are subject to market declines.

·     Factor in medical costs. Aging often brings additional health care costs. With Medicare failing to pay many of the exorbitant costs, long term care insurance may be a smart investment or an annuity with LTC benefits.

·     Change your lifestyle. If your client cannot work, find ways to conserve assets. Downsize house or cut down on dining out. In addition, watch out for fees and taxes.

Stephani Lucas 858-356-9368

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