The typical retirement plan devised by a financial advisor will call for you to manage your investments in stocks, bonds and cash so that they last through your projected life span.
I agree that you need to create a plan to manage your investment assets, but I also remind people entering the retirement zone to consider their other assets and resources: Your house, income annuities – and your ability to continue to work.
To paraphrase Marty McFly, who time-traveled between the 1950s and the 21st century in a souped-up Delorean sports car, the key to a successful retirement is to plan “back from the future.”
Actually, Marty didn’t concern himself with retirement. But imagine how the rest of us could improve our retirement planning if we had a glimpse of what will really happen 20 or 30 years from now. We would know exactly how to invest our savings, what the cost of living or market returns will be, and what happens to our health, our kids and grandkids.
Alas, to quote another great mind, physicist and philosopher Niels Bohr, who won a Nobel Prize, “Forecasting is particularly difficult, especially concerning the future.”
That leaves us only with planning from the present.
Even as we all hope to live long and healthy lives, you’ll be a better planner if you anticipate what might go wrong in retirement. I said in the first part of this blog that I would tell you how and when to plan for the basic retirement objectives that will bring a bright retirement future. I call them the Three Ls: lifetime income, liquidity and legacy.
As a longtime student of retirement products and planning, I’ve often been critical of most retirement calculators . I’ll go out on a post-election limb and say that it appears that most of the predictive election models suffer from similar limitations.
Retirement calculators supposedly help you determine how much money you need in the present to be able to enjoy retirement during an average lifespan. But the averages don’t work out for the situations of specific people, who aren’t average and whose lives are not governed by the assumptions built into the models.
Likewise, numerous election polls this year talked to small numbers of people and then extrapolated based on “average” voter turnout and preferences among several different groups. Even some of Donald Trump’s own pollsters told him on Election Night that he was headed to defeat, based on their interpretation of the numbers. More
The White House Conference on Aging that concluded this month was remarkable for its acknowledgement that too few Americans are assured of a secure late-in-life retirement. The conference did not, however, fully spell out how to solve the problems it raised.
The conference’s final report also concluded that the three-legged stool of Social Security, personal savings and employer savings arrangements is a little wobbly, putting millions of retirees in danger of running out of money in old age. In addition, as retirees age they often see their incomes fall and face unplanned medical and long-term care costs–thus magnifying the problem.
The Conference on Aging listed the favorable qualities of annuities, mentioning that income annuities “reduce the risks that retirees will outlive their savings or that their living standards will be eroded by investment losses or inflation.” More
What you can do to protect your retirement savings.
With mind-numbing stories coming out about who won and who lost the debt deal debate, and whether the debt deal really solved anything or only pushed it to a super committee, individual investors are still bewildered, frustrated and nervous. Now, with the stock market falling and interest rates behaving in seemingly irrational ways, Americans are skeptical as to the right strategy to adopt today in planning for retirement.
Here are some smart moves that you and other investors can consider making right now that will save you money and perhaps help you sleep a little more peacefully.
Save taxes on additional savings –
Statistics show that investors are on average increasing their savings, and while economists see that as a negative for the economy, I view this as a positive. However, if the savings are invested in accounts, funds, etc. outside a 401(k) or IRA, everyone should be tax-smart with these savings. While we don’t know what any “tax reform” might bring, I suggest you consider investing a portion of your retirement savings in a no load variable annuity (VA). Not only will that enable you to defer taxes on investment earnings until these funds are withdrawn, it could also help result in a lower tax bracket for you. That might be particularly helpful if tax reform eliminates or caps some of your favorite deductions.
In terms of timing, with the value of these taxable accounts taking a beating these past few days, now may be the time to sell a portion of those securities with little or no gain, and have any market recovery take place in a tax-deferred account. Also, with the tax benefits of annuity-investing in otherwise taxable fixed income options, this new VA account could be invested more conservatively.
In general, the time to move up in tax class, e.g., regular IRA to Roth IRA, or taxable to tax deferred, is on a market downturn.
Lower Fees – While the government is
doing some belt-tightening, as are those who may be increasing their savings, why not ask financial service providers to do the same? That means you should:
These lower fees make any additional savings even more valuable. If the provider argues that you’ll get more value from their higher fees, then I would counter by stating that in this environment, the economy and the government moves or non-moves trump whatever the provider offers.
These are just two of my Seven Golden Rules intended to dramatically increase sustainable retirement income from Personal Retirement Savings.
You can find the Seven Golden Rules, and more about saving and investing for retirement, at www.GoldenRetirement.com.
Jerry Golden
President
Golden Retirement, LLC
www.GoldenRetirement.com
