By 2030, it’s estimated that 20 percent of the U.S. population
will be over age 65.1 That means a fifth of all Americans will be on
the fringe of retirement or already retired, a milestone that’s generally perceived
to come late in life. But consider this, there are approximately 8,000 days in
today’s average retirement. That’s approximately the same number of days from:2
- Birth to college graduation
- College graduation to mid-life crisis
- Mid-life crisis to retirement
Eight
thousand days translates to about 22 years. That may seem long for retirement,
but it’s actually quite common these days: Retire at 65 and live to 87; retire
at 70 and live to 92; retire at 80 and live to 102. More people are doing this
all the time.3
If you are
fortunate enough to enjoy 8,000 days of retirement, you’ll need plenty of retirement
savings accumulated to make it last. For many people, that may not happen. Some
young people don’t save enough because they struggle to make ends meet. People
in their 40s might splurge on a sporty convertible or have unexpected expenses
for a family member.
Sometimes the
bulk of retirement saving gets crammed into those 8,000 days between mid-life and
retirement. If this scenario sounds familiar, note that we have experience
working with clients who are in similar situations. One of the keys is to use today’s
retirement income strategies and financial vehicles to help maximize your
assets for long-term financial confidence. We can use a variety of investment
and insurance products to customize a financial strategy for your unique
situation.
One possible
strategy to help with the concern of outliving your retirement income may be to
delay starting Social Security benefits.4 For example, an economist at
Boston University demonstrated a scenario in which a 66-year-old retiree begins
withdrawing income from his 401(k)/IRA account while delaying Social Security
until age 70. His calculations show that this strategy would yield a higher
income throughout retirement than if the retiree started pulling from all income
sources at full retirement age.5
Also
remember that the concept of 8,000 days is a middling number. Roughly, half of
retirees will die before 8,000 days and half live longer. Annuities can be an
option for people who want to help ensure a portion of their retirement income
will be guaranteed. An annuity is an insurance contract that can provide long-term
retirement income to help protect you against longevity risk, such as a
retirement spanning two decades or more.
It’s
important to understand there are several different types of annuities, and
they don’t all work the same way. They may offer various features; such as
payout options, death benefits and potential income for your spouse. Some can
offer guaranteed income (a fixed annuity) while others offer an income stream
that relies on the performance of the investments you choose (a variable annuity).
There may be tradeoffs for these features, like additional fees or lower income
payouts.6 A financial professional can help you understand which type
of annuity suits your financial needs.
Content prepared by Kara
Stefan Communications
1 Richard Eisenberg. Forbes. May
9, 2017. “Why Isn't Business Preparing More for The Future of Aging?” https://www.forbes.com/sites/nextavenue/2017/05/09/why-isnt-business-preparing-more-for-the-future-of-aging/#108dfd522dec. Accessed July 31, 2017.
2 Ibid.
3 Ibid.
4 Mark Miller. The New York Times.
Feb. 18, 2017. “How to Make Your Money Last as Long as
You Do.” https://www.nytimes.com/2017/02/18/your-money/retiring-longevity-planning-social-security.html. Accessed July 31, 2017.
5 Laurence Kotlikoff. Dallas News.
May 5, 2017. “Which should you take first: Social Security or your 401(k)?” https://www.dallasnews.com/business/personal-finance/2017/05/05/take-first-social-security-401k. Accessed July 31, 2017.
6 CNN. 2017. “What is an annuity?”
http://money.cnn.com/retirement/guide/annuities_basics.moneymag/index.htm. Accessed July 31, 2017.
The hypothetical example provided
is for illustrative purposes only; it does not represent a real life scenario,
and should not be construed as advice designed to meet the particular needs of
an individual’s situation. We are able to provide you
with information but not guidance or advice related to Social Security
benefits. Our firm is not affiliated with the U.S. government or any
governmental agency.
Insurance and annuity product
guarantees are backed by the financial strength and claims-paying ability of
the issuing insurance company. Annuities are insurance products that may be
subject to fees, surrender charges and holding periods which vary by company.
Annuities are not a deposit of nor are they insured by any bank, the FDIC,
NCUA, or by any federal government agency. Annuities are designed for
retirement or other long-term needs.
This material is intended to
provide general information to help you understand basic financial planning
strategies and should not be construed as financial advice. All investments are
subject to risk including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining
values.
The information contained in this
material is believed to be reliable, but accuracy and completeness cannot be
guaranteed; it is not intended to be used as the sole basis for financial
decisions. If you are unable to access any of the news articles and sources
through the links provided in this text, please contact us to request a copy of
the desired reference.
Investment Advisory Services
offered through Global Financial Private Capital, LLC.
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