Joe Lucey

Building up a retirement nest egg is one thing, but making it last throughout your lifetime is quite another. With a larger share of the financial responsibility for retirement shifting from employers to employees, it’s more important than ever to explore all income strategies to help determine what is most appropriate for your situation.

One thing to consider is your Social Security benefit strategy. For many, the spousal benefit is based on the primary earner’s level of income. While you might be tempted to start taking benefits as soon as possible, there may be good reasons to delay. First, the longer you wait (up until age 70, when increases cease), the higher your payout for life. Perhaps more importantly, waiting to take benefits could leave a higher benefit for your spouse should you pass away.

Remember, if you take a lower benefit early, your surviving spouse may receive that reduced amount for the rest of his or her life. A surviving spouse receives the higher benefit, whether it’s their own or their spouse’s, but the household will no longer receive both. Since Social Security represents the only guaranteed income stream for many of today’s retirees, it’s a good idea to consider ways to delay starting the benefits in order to potentially increase that income stream.

In addition to a Social Security strategy for lifetime income, the following are other financial vehicles typically used to provide long-term income and/or growth opportunity in a well-diversified financial strategy.

Bonds — While traditional bonds can provide a reliable stream of income, they come with a maturity date. At that point, an investor must decide where to reinvest the principal. One strategy is to hold a selection of bonds with varying maturity dates. Investors can also take advantage of the inherent diversification provided by bond funds by letting a professional money manager make ongoing decisions about where to reinvest assets from maturing bonds.

Dividend-Paying Stocks — Stocks with a strong history of paying dividends also offer a source of ongoing income. Here, too, investors may prefer to buy a dividend income fund to take advantage of a fund manager’s buy and sell experience. It is important for investors to understand that dividends are paid at the discretion of the board of directors and are therefore not guaranteed.

Annuities — There is a wide range of annuity options that can be tailored to a retiree’s specific needs. Many offer a fixed level of income for a specific time period or for life and can be customized with optional benefits, such as income riders that increase income payments commensurate with inflation. Please note that optional riders may not be available on all products and may have an additional cost. Fixed index annuities offer individuals the potential for interest credits based on positive changes of an external index without actual participation in the market, while still receiving certain guaranteed protections backed by the financial strength and claims-paying ability of the issuing insurance company. The amount of interest you receive from a fixed index annuity can vary, and there is a limit on how much interest you could earn.

 

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Some people set a particular age when they want to retire. It might be more helpful to look at your financial schedule to establish a retirement date. Just because you want to retire on a certain birthday doesn’t mean you’ll be quite financially ready to do so. After all, there’s more to retirement planning than just paying off your mortgage.

Consider the following list of 16 things to do before the big day.

1. Pay off all major debt obligations, including auto loans, credit card balances and the mortgage for your primary home and any vacation properties.
2. Consider life insurance needs — do you need a death benefit for your spouse, or do you have enough for both of you in retirement income sources? Do you want to ensure a legacy for your children or grandchildren?
3. Consider long-term care insurance — discuss your current situation and needs with a financial professional to help determine the long-term care insurance options that may be appropriate for you.
4. Consider an additional source of steady and reliable income, which may mean repositioning a portion of your investment portfolio to protect those assets from market risk and create a lifelong income stream through the use of insurance products, such as annuities.
5. Conduct a house check — see what major repairs may be needed at some point during retirement, such as a new roof, water heater or HVAC system. Have appliances checked out for an estimate of how long they may last.
6. Do any remodeling that’s been on your mind for a while; consider keeping a spare bedroom for future live-in help.
7. Get your house outfitted to accommodate your needs in the future. It may seem unnecessary now, but it’s best to make these upgrades before you’re on a fixed income. Consider adding handrails to the porch stoop, grab handles in the bathroom, rearrange kitchen cabinets so the things you use the most are the easiest to reach, replace doorknobs and faucets with lever handles that are easier to open; if your house has several stories, consider moving your bedroom to the ground floor.
8. Assess how long your cars should last; consider trading in/purchasing a new one if it looks like you might be saddled with repairs on an older car.
9. Put together an emergency fund to help cover costs likely to be incurred later on, from replacing the roof to buying a new car. Even pad it for financial support you may need to provide your children or grandchildren in the future.
10. Work with a financial advisor to conduct a full assessment of current and future expenses to see what can be eliminated (work clothes and dry cleaning), new expenses (taking up golf) and expenses that will “trade out” as you age (travel budget for more health care spending).
11. After you figure out how much your expenses could potentially change over the years, develop a budget for each phase of retirement.
12. Work with a financial advisor to help coordinate Social Security benefits with your personal savings and investments withdrawal strategy. It’s important to know that financial advisors are able to provide you with information but not guidance or advice related to Social Security benefits.
13. Consider downsizing now or in the future, based on lifestyle plans. For example, if you plan to travel extensively, it may be easier to maintain a condo rather than a large house. If you plan to settle in, garden and spend time at home, keeping the family house may make more sense. However, create a contingency plan for later years in case one or both spouses need assisted or full-time care.
14. Even if you don’t downsize, consider making an inventory of your possessions and getting rid of clutter you don’t need and passing on unused furniture and housewares to your children.
15. Work with an attorney to establish an estate transfer plan and communicate it to all family members. Review it every few years to ensure it’s still relevant and reflects your wishes.
16. Complete paperwork for medical directives and powers of attorney.

This is quite a laundry list, and it’s likely that once you get started, you’ll think of other things you should do. But consider the reassurance you’ll enjoy if you get most of these things done before you retire.

Guarantees and protections provided by insurance products including annuities are backed by the financial strength and claims-paying ability of the issuing insurance carrier.

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

The economy has grown, in large part, because consumers are spending more money. It remains to be seen whether that trend will continue as more of the massive baby boomer generation approaches retirement.

Even before people retire, many tend to slow down their spending habits. Part of this is lifestyle driven; by age 50, most consumers have bought a home, furnished it, sent their kids off to college and are reining in their household budget.

The highest years for earning often come just before retirement but that’s also the time with the least amount of growth in income. According to studies conducted by the Federal Reserve Bank of New York, young adults see the fastest income increases. Those increases slow mid-career, and by the time we’re in our 50s, our hard-earned salaries could represent negative real wage growth.

Given little to negligible income increases during the latter stages of a career, it is more likely older workers are saving their money for retirement — not pouring it back into the economy. Recent research revealed that 80 percent of baby boomers are cutting back on how much money they spend. Among them:

• 54% reduced discretionary expenses
• 47% reduced recurring monthly expenses
• 35% have created and maintain a household budget

The Congressional Budget Office reports that once the majority of baby boomers retire, government spending as a percentage of GDP will likely increase by another 9 percent due to the jump in entitlement benefits.

Not only will baby boomers likely be spending less as they age, many will continue to work. However, the mix of jobs available to older workers is changing as well. Over the past 26 years, 30 percent of manufacturing jobs have been eliminated, while service-oriented jobs in the education and health care fields have doubled.