Many people incorrectly assume that retirement income plans are only for the wealthy. On the contrary, there are multiple income options that one may pursue to ensure financial security after retirement, regardless of current net worth. As retirement nears, most people tend to focus on the traditional fixed-income products. While these options may have worked fine in the past, they are no longer the only option.
Today, life expectancy among Americans has improved thanks to advancements in both pharmaceuticals and medical technology. People are retiring at 65 have greater than a 50% chance of seeing their 90th birthday, and the percentage of centenarians has grown 65.8 percent nationwide over the past three decades according to the latest census data.
One of the downsides of living longer is the possibility of depleting your savings during your lifetime and outliving your money. This is the number one fear among senior citizens today, and is why it’s important to have a retirement income plan and strategy that will last at least 25 to 30 years.
Figuring out how to stretch your savings up to 30 years after retirement can be both overwhelming and confusing. However, if you know the options available, things will be easier. Below is an overview of some retirement plan options you can consider:
When it comes to investing, time could work in your favor. Generally, your money is more likely to grow if you invest for the long-term. If you have taken losses in the recent past and are still on the road to recovery, a more aggressive asset allocation can help to grow your wealth faster. Trying to do this alone can be foreboding, so consult the advice and input from a professional.
Long-term care is another thing to consider when evaluating your retirement income strategy options. If your current insurance coverage will not cover long-term care, it’s critical to start planning for these potential expenses, as the percentage of people requiring some form of assisted living, in-home healthcare or confined nursing home care is on the rise.
It’s impossible to predict future market volatility and therefore, investing involves risk. To mitigate against unexpected economic downturns, you should have investments across multiple asset classes. Prudent investing requires diversifying your risk, enabling you to build on your existing wealth while minimizing unforeseen downsides. Consider various retirement income vehicles and “Safe Money” strategies such as annuities and life insurance products to help you meet your income goals.
Are you nervous about the potential of a rising tax environment and the impact it will have on your retirement savings? If so, you need a solid retirement income strategy that addresses those concerns and helps to minimize your future tax burden. For example, investing in a tax-deferred plan will ensure your savings earn compound interest over the years without having to pay taxes while you are still working. Distributions will be taxed at whatever income-tax rate you’ll have in retirement, which will be presumably lower.
Life insurance is no longer ‘death insurance’ to be paid to beneficiaries. Today’s best products come with living benefits that the insured may access while still alive. Some products may also be used as a tax-free income bucket during retirement. And all life insurance will financially protect your loved ones from hardship after you are gone. Ideally, you should speak with an independent professional not tied to any one company, and choose a plan that addresses your family’s needs and that fits well within your budget.
Many Americans are worried about outliving their retirement savings. With the reduction in pension offerings over the last few decades, it would be wise to have a fixed income vehicle in your investment strategy. Annuities come in three forms – variable, fixed and indexed, each with its advantages, and allow you to receive a fixed and guaranteed payout over a certain period of time, sometimes up to a lifetime.
A trust is a legal entity into which your assets are placed for your benefit during your lifetime and are then transferred to named beneficiaries, specifying how they are to be distributed after your death. They help to protect assets, minimize tax liability and avoid probate. Setting up trusts can be complex and executing them even harder, and therefore an attorney is required. However, a properly formed trust is flexible and offers multiple advantages on transferring your assets in future.
Just because you may have one or more of the ingredients above, without a properly formulated plan, you may have a recipe for disaster.
Call us at 704.560.1573 or email us at SafeMoney@TZGFinancial.com to schedule a consultation to discuss your financial future.