FINANCIALLY
Speaking
Retirement … ready or NOT !!!
by
Jeffrey M . Orth , ChFC , CASL Investment Advisor Representative of HTK
Jeffrey M . Orth is a Chartered Financial Consultant , a Certified Advisor in Senior Living , and an Investment Advisor Representative , with over 10 years experience as a business and personal planning , insurance , and wealth management specialist . Jeff is available for group lectures and private consultations . Visit his website at www . ifitfinancial . com or call 408.842.2716 .
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As a young man , I remember having a number of conversations with my grandfather about the importance of saving for the future — saving for retirement . Back then , retirement planning was much simpler , as the average man retired at age 65 and died 2½-5 years later . The plan was : save some money and keep it safe . How things have changed ! I currently plan on my clients being in retirement for 30 years . In some cases , they will spend more years in retirement than they do in their working years . When you need to plan for 3 decades of retirement , inflation becomes a much bigger issue , as your buying power erodes with each passing year . Investment mistakes become more damaging to the overall success of your retirement plan as you aren ’ t able to go and “ earn your way out ” of the problem . Having guarantees that adjust for inflation and protect your investments become more and more important . So , the good news is that people are living longer , but the bad news is that people are living longer ! And if you are like a lot of people you are more concerned about running out of money before you run out of life than you are about dying too soon .
As a Chartered Financial Consultant , I always take stock of what assets my clients currently have in place and determine what a successful retirement looks like for them . Then we work backwards from the goal and try to plan with the end in mind . To do this we need to answer some questions that may make some feel uncomfortable , as they realize they either don ’ t know the answers , or they realize how unprepared they are for retirement .
Do you have the answers to the four toughest financial questions everyone needs to know ?
1 . What rate of return do you have to earn on your savings and investment dollars to be able to retire at your current standard of living and have your money last through your life expectancy ?
2 . How much do you need to save on a monthly basis to be able to retire at your current standard of living and have your money last through your life expectancy ?
3 . Doing what you are currently doing , how long do you have to work to be able to retire and live your current lifestyle until life expectancy ?
4 . If you don ’ t do anything different than you are doing today , how much will you have to reduce your standard of living at retirement for your money to last to your life expectancy ?
To answer these questions with any degree of accuracy requires :
1 . Calculators that are sophisticated enough to handle a large number of variables at one time .
2 . An advisor capable of handling timing issues related to post-retirement asset consumption .
A good investment plan is as much about avoiding loss as it is about the rate of return . Most people are ‘ transferring wealth ’ ( losing money ) from their own estate unknowingly and unnecessarily . They are not only losing the money but also the additional money it might have earned for them . This is called “ opportunity cost .” There are a number of great tools currently available that are designed with loss prevention in mind . As one approaches and enters their retirement years , it becomes even more important to reduce risk exposure while maintaining healthy growth . Timing issues are critical as well in any retirement plan . Knowing which asset to use and when to use it can have a significant impact on ‘ the bottom line ’. For example , I have found that knowing when to turn on each spouse ’ s Social Security retirement benefits alone can at times make more than a $ 250,000 difference in a couple ’ s lifetime retirement income .
Life in retirement will be a lot more enjoyable if working longer is something you do because you want to , not because you have no choice . If you are forced to stop working earlier than planned is your retirement plan still going to be working for you ? According to the 2012 Employee Benefit Research Institutes Retirement Confidence Survey , about half of retirees leave the work force earlier than planned . The top reasons are : health problems , being forced out of a job , or to care for a spouse , parent or other family member .
Should you have a financial advisor help you manage your pre-retirement and postretirement portfolio or attempt to go it alone ? It has been said , “ If you want to go fast go alone , if you want to go far go with others who know where they are going .” There are many complex factors that are involved with successfully preparing financially for retirement . Having an expert working alongside you can help make the process less stressful . Charles Darwin observed , “ It is not the strongest of the species that survives , nor the most intelligent that survives . It is the one that is the most adaptable to change .” Has your retirement plan changed to protect your plans for a happy and satisfying retirement ? At some point it ’ s going to be time for your retirement- ready or not !
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