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Lifetime Income Planning

In today’s world, financing a comfortable retirement is a more complex challenge than it was for previous generations. Unlike those who could rely on secure lifetime incomes from professionally managed pensions, millions of Americans today serve as their own pension managers. Many retirees may make uninformed decisions that could mean the difference between enjoying a comfortable retirement, and not having enough money to support themselves for the rest of their lives.

Planning for retirement can be daunting. We can help to develop retirement income plans that you can work with and not outlive.–What are the main risks that can derail a successful retirement income plan?

Longevity

Many people underestimate their lifespan and risk outliving their assets. The facts indicate that half of the population may outlive the “average” life expectancy. A successful lifetime income plan helps prepare you for living into your 90s.

“You need to plan for the possibility that you will live longer than you think.”

Inflation

Inflation poses two challenges to retirement planning:

  1. By increasing future costs
  2. Eroding the value of assets set aside to meet these costs Even a moderate rate of inflation can have a significant impact on a retiree’s purchasing power. The anticipated longer retirements make it more important than ever that portfolios include investments with the potential to outpace inflation.

Asset Allocation

Many people think they need a conservative portfolio, but given the anticipated length of their retirement, this could create a heightened risk of outliving their assets. A key to long-term success can lie in a “balanced” asset portfolio.

Withdrawal Rate

A conservative withdrawal rate can dramatically decrease the likelihood of retirees outliving their assets. This approach of using conservative withdrawal rate assumptions may dispel some inaccurate myths; however, most clients appreciate receiving an honest appraisal to help in creating an income plan they cannot outlive. The flip side is, of course, helping clients understand how much they may need to save to meet their lifestyle goals.

Health Care Expense

One final risk to financial security in retirement is the rising cost of health care coupled with inadequate coverage. This can have a devastating impact on a lifetime income plan. Addressing this risk may include targeting savings specifically for health care and considering purchasing long-term care insurance.–