Truth or Consequences
By Steve Gaito
Lately, I have had several conversations about retirement income with clients about their parents. It is a common challenge. When I started providing retirement planning you could go to the bank and get a CD for over 10% and Fixed Annuities were over 12%. It was what I call the good old days. If you had $500,000 of retirement assets you could draw $50,000 to $60,000 of interest a year. Fast forward to the current situation where you are lucky to get 1-1.5% or income off that same $500,000 and it is now $5,000 to $7,500 in interest for the same $500,000. The option that many advisors recommend is diversifying your portfolio. If we look at the recent 20 years of the market the S&P 500 TM just slightly above 6.5% which would provide $32,500 but who wants 100% of your money in stocks? Everyone remembers what happened between 2000 and 2009. The return on the stock market was negative for that whole period. What can you do? Therefore, understanding the income part of retirement planning is critical to the success of retirement. First, we must address the truth. That is that we are not going back to the interest rates of the past. The second is that the market is too volatile for consistent income given today’s stock market. The third is you must plan for Long Term Care. With costs exceeding $100,000 for 24/7/365 care it can deplete savings in a hurry. The consequences of not planning for income are devastating.
Now that I have gone through the truth and consequences, how do we address them and minimize the impact? For the last several years I have been working with people to free them from the bondage of an investment portfolio. I help them create income streams that meet their needs and minimize taxes. If you think about it for most of us, we are used to living on a paycheck every month. We pay our bills, go on vacation, purchase cars, and buy groceries. It is comfortable. So why does everyone seem to think that it is normal to live off a portfolio of stocks and bonds for the rest of their life? It makes no sense to me. I believe in having an emergency fund in retirement just like while working but based on the clients I have worked with having a paycheck provides much more freedom than worrying about what the market does on any given day. Think back to when you first started saving for retirement. What was the purpose? It was to provide income to live after you stopped working. Now is the best time to create that income. With the market at or near all-time highs should not you consider creating your income plan now instead of waiting for another correction?
I realize that this is different from what most hear, but like interest rates that have changed so must the way you plan in retirement. The question is what do you want to do? Worry about the stock market or spend time with your grandkids? It is not that complicated and if you have questions, please feel free to come into my office and take advantage of the free initial consultation. I will show you the difference and you can make an educated decision. I can help you create your own retirement paycheck so you can enjoy life.
Steve is the owner of Faith-Based Health Care and Retirement Resource Management. He is a National Speaker on the topic of Social Security optimization, quoted in national publications like Money Magazine, US News and World Reports, and Fox Business. Steve loves to educate and teach on financial topics like taxation of retirement accounts, long term care, healthcare, and efficient savings plans for small businesses. He has provided financial planning for missionaries through the International Mission Board. You can find Steve at 68 South Main St. in Marion, NC by calling 828-559-0299, email firstname.lastname@example.org or visit his website at www.faithbasedhc.com.
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