The Dreaded Four Fears Of Retirement Planning
Every day I hear from those who come into my office four fears:
1. The fear of outliving my money
2. The fear of having to put off retirement
3. The fear of having to go back to work
4. The fear of having to cut back on my lifestyle
These are genuine concerns and for an excellent reason! Americans are living longer; with the advancement of medical technology, knowledge of healthier eating, and lifestyle options, the average 65-year-old can expect to live to be 84 for males and 88 for females. One in four will live past 90, and one in ten will live past 95.
With that said, if you are planning on your retirement dollars to only last 15 years past retirement (which is what generations have done in the past), you need to look at options that will give you a guaranteed income that will last no matter how long you live.
The other rising problem that baby boomers face that previous generations did not have is the genuine concern for long-term care costs. Generations in the past had the family to help care for those unable to care for themselves, but now, most families are scattered. With the expectation of living longer, long-term care is a significant concern. The Center for Retirement Research at Boston College estimates that 44% of men and 58% of women will need long-term care after age 65.
The other three fears are tied to several items we have no control over; inflation, interest rates, and market volatility. At the same time, you build up your retirement assets and have the income and time to overcome the threats to your retirement income plan. Then the time comes to start the “de-accumulation phase” – when you start spending your asset to supplement Social Security income, you no longer have the time nor the income to replenish what the market may take away.
Now add the fear of rising inflation costs and the low-interest rates earned on Bank CDs and Money Market accounts.
Lastly is the past planning of the 4% rule. The 4% rule was used by “Wealth Managers” to “hopefully” allow their clients to not run out of money since more managed accounts are at risk for market downturn and loss. The old way of thinking was that you could take 4% of your account value a year and “should” not run out of money. Of course, they cannot guarantee you won”t run out of money, and if your account gets low, their advice; spend less – in other words, cut back on your lifestyle.
But the leading economic advisors now say that to avoid running out of money, you should only take out 2.8% of your account value, and once again, “hopefully,” your money should last.
So, what is the answer those who sit in my office ask? I then ask them this question; how much of your portfolio can you afford to lose? How much of your portfolio do you want to keep risk-free? And lastly, how much money do you need every month to pay the bills and still enjoy your retirement dreams?
What is your plan for Long Term Care?
Once I have those answers, I can then do my research and come up with a plan to take a portion of the portfolio one that they cannot afford to lose, that they want to keep out of harm’s way, and gives them the income they need not just to live, but to thrive and enjoy their retirement without fear and worry. My clients are thrilled to hear they can have an account that gives them guaranteed income for life, is always protected against market risk, helps pay for Long Term Care, and is protected and insured by a multibillion-dollar, highly rated insurance company.
The answer to all their problems is simple; a Fixed Index Annuity. A Fixed Indexed Annuity can provide lifetime income based on safety, security, and guarantees.