Will You Have a Happily Ever After Retirement?

August 07, 2015

What ever happened to happily ever after? With over 11,000 baby boomers a day entering retirement, new retirees are concerned about our current economic environment; many are down right scared at what the future holds. Gone are the days where one retires at 65 and passes by 72. The National Center for Health Statistics notes that the average mortality for a male is 81 and a female is 85. And remember, that’s average! I work with clients each day who say, “Mark, we never thought we would live this long.” Many are living well into their 80’s and 90’s and yet are living active, vibrant lives. This reality creates a whole different perspective on living on a fixed income for 25 to 30 years.

My father always said, “Preparation is the mother of self-reliance.” To aid in one’s preparation, consider the following eight questions. We address these questions at my monthly Estate Preservation Seminars. I have found them most helpful as pre and post retirees prepare for the future.

Are you protecting the castle? – People used to live in castles. What was around every castle? A moat or a wall! What was the purpose of the moat or wall? For protection against those infamous marauding bands trying to steal our stuff. Of course we don’t have moats today. Can you imagine what your neighbors or the city building department would say? Today we have insurance! I hate paying insurance bills like everyone else, but if you get in a car accident and it’s your fault and in the event of a lawsuit, your estate is at risk. I have seen retirees forced to liquidate assets to satisfy a judgment because they didn’t have proper coverage. This is heartbreaking!

Have you quantified the risk? – There are a variety of risks facing retirees. Market risk, inflation risk, capital preservation risk, survivorship and legacy risk as well as long-term care and longevity risk. Each of these risks places unique problems for retirees. The key is to identify and then quantify each risk. Once accomplished, strategies can be put in place to mitigate them.

Are you being efficient and effective? – A great example of a lack of efficiency is having your money tied up in money market accounts or CD’s. I support this quest for safety, but the rate of return being offered on these accounts falls terribly short of simple inflation. As of August 2015, bankrate.com displays that the 1-year CD rates range from a paltry .18% to 1.25%. Savings accounts are even less! Most retirees don’t know they may have better options! Strategies exist that provide security and liquidity, but can yield much higher rates of return.

Are you considering the eroding factors of taxes & inflation? – Taxes are likely going up and inflation may increase as well. A 65 year old could live 30 more years. My grandfather in Hemet, CA is 101 years old. He finally stopped driving last year! My father turned 82 last year and still plays tennis three days a week. Amazing! Eroding factors impact a financial strategy, especially estate taxes. Consider the trajectory of future inflation and taxation due to the Federal Reserve’s printing of nearly $1.0 Trillion in the last several years and the current level of government debt ($18.3 Trillion).

Do you have the right to enjoy your wealth? – I have often said, if you have to ask for permission or pay a penalty, it’s not your money. Being free to enjoy your wealth is important. Having your money in an annuity might be a good strategy if your objective is long-term growth, but what if you could get both increased returns and accessibility? There are strategies that can provide both!

Is your strategy coordinated & integrated? – We must look at our financial lives like a chessboard. Each piece represents a part of your financial life. When we move one piece on the chessboard the rest of the pieces on the board are affected. One move is not a move unto itself. Each action has a corresponding reaction. We must learn this strategic nuance in our preparations!

Will your strategy work under most economic circumstances? – If we have aggressive inflation or if taxes go up, will your game plan work? If the market has another melt down will your strategy work? If you have a long-term care event, will your strategy work? I stress test my client’s strategies to make sure they will hold up.

What about survivorship issues? – I am working with a client presently whose pension stops when he dies. We are scrambling to make up this short fall for his surviving spouse. Better preparation could have averted this problem years ago.

These are just some of the important questions to address as pre and post retirees look to the future. Financial peace results when effective financial strategies are developed and implemented to mitigate the risks associated with retirement. Once achieved, pre and post retirees can focus their lives on what matters most. Get on the road to financial peace by engaging the process of preparedness!