Retirement Income Planning Tips for 2017
Retirement income planning has changed drastically over the last three decades. Thirty years ago most Americans could safely rely on Social Security and a pension to provide the income they needed in retirement. That’s no longer the case. Today we have much greater personal responsibility to create our own retirement income plan. To help make sure that a retirement portfolio lasts a lifetime, we will have to prepare for and manage the following common risks to retirement income.
Hold a Year End Review If you plan to retire in the next five years, or are currently retired, December and January is a great time to conduct a review of your retirement income plan. Are you on track? Is your principal protected from market downside? Are you on track to meet your goals? “Every day we meet individuals, who plan to retire within the next 10 years, concerned they will run out of money during retirement. Your income plan must include a plan of reliable and increasing income that will outlast you.
Reduce Fees Research and analyze the fees that are currently embedded in your portfolio. Enter the mutual funds, EFTs and ETNs in your portfolio and analyze the net fees for a specific holding period. Typically, 10 years holding period provides a good benchmark to costs. Taxes and fees are corrosive to a retirement plan principal and earnings. Minimizing both taxes and fees can provide a more secure retirement.
Cut Costs, Save More Saving when employed is easier than going back to work at age 70 because you didn’t save enough while working in younger years. Retirees who enter back into the work force after retirement are often working for minimum wage because of a lapse in skill set and experience. Find ways now to lower spending: housing, cell phone, cable, college expenses, insurance, and automobiles, etc. Review all of your household operating costs. What can you lower or cut to help achieve your retirement income goals.
Avoid Taxes in Retirement Income taxes and real estate taxes in retirement are difficult to predict. Many economists believe that the Federal government will need to increase taxes to offset the multi-trillion dollar deficit. If you plan now, there are several ways to get tax free income in retirement. “If taxes rise in retirement, you need a plan to receive tax free income from your Roth IRAs and the cash values of a life insurance policy.
Start Preparing for Health Care Expenses Health care and long-term care continue to rise year over year. Start planning now on how to pay for these expenses during your retirement years. Health care and long term care costs are fast ways to exhaust retirement savings, home equity, and other assets. “The odds are high that many retirees will need some form of long-term care. It can financially wipe out a couple’s savings in a matter of months. You don’t have a retirement plan if health care and long-term care is not planned for.
Managing the Risks to Retirement Income
Market Risk Market trends are one of the most important factors to portfolio longevity, perhaps second only to the retirement account’s withdrawal rate. Investors typically spend decades saving for retirement. Systematic investing in a fluctuating market coupled with historically rising trends has helped many Americans accumulate sizeable retirement accounts. However, when Americans retire and stop contributing to and start withdrawing from retirement accounts, they become much more susceptible to market risks.
Interest Rate Risk Most agree that the interest rates today are low. This creates additional pressure for the average retiree to create the income they need to live comfortably in retirement. In the past, many could rely on an interest of 5 percent or more. In fact, the 10-year U.S. Treasury note was above 5 percent from 1968 until 2002
Woloshin Investment Management Services
To develop a financial strategy for your future, it's important for your financial professional to see a complete, 360 degree view of your financial picture, including how your retirement assets are integrated and work with one another. Our financial strategies and asset management services use insurance products, such as annuities, to help you meet financial goals. We can work in concert with tax professionals or attorneys in your or our network to advise you on specific aspects of your financial strategy.