Her Retirement Rolls Out New Corporate Financial Wellness Program

We’re excited to announce our new financial and retirement wellness program for employers.

Our mission is simple…to empower your employees, and make preparing for retirement easier and living in retirement more prosperous. We want to take the work and worry off your employee’s plates with our Her Retirement approach to retirement planning, regardless of whether you’re employee is 35 or 65 and getting ready to retire.

Our workplace financial wellness solutions include onsite Lunch-n-Learns where we come into your facility and teach a number of no cost financial and retirement workshops. We then offer older attendees a complimentary “Am I Ready” Assessment to help them determine when they can retire and if they will have enough income to last throughout retirement.  For younger employees, we offer a fee-based 401(k) assessment that helps them determine:

  • Am I putting enough money away for retirement?
  • Do I have the right investments in my plan?
  • Do I have the proper allocations?
  • What will be my best withdrawal strategy to minimize the effect of taxes?

In addition to this assessment, we offer a number of other assessments and full planning services. This is a great value added service to offer your workforce.  Consider a few facts below and then contact us about bringing our program to your organization.

“More than 88 million employees are responsible for managing their own retirement assets. However, it’s estimated that these same employees lose $100 billion every year due to investment mistakes!”(1)

The Society for Human Resource Management (SHRM) noted in its 2016 Employee Benefits survey report that 61 percent of HR professionals polled last year described their employees’ financial health as no better than “fair,” and 17 percent reported their employees were “not at all financially literate.”

Other research highlights why these benefits are needed. PricewaterhouseCooper’s (PwC’s) 2016 Employee Financial Wellness Survey, with responses from 1,600 full-time employees, showed that:

  • 52 percent of workers overall are stressed about their finances. And the younger the worker, the more likely he or she is to be worried: 64 percent of Millennials said they are stressed about their finances.
  • 46 percent of workers spend three or more hours during the workweek dealing with or thinking about financial issues.
  • 45 percent said their finance-related stress had increased over the last 12 months.

“The benefits to employers of addressing employee financial stress are significant. Financial wellness programs drive engagement, productivity and success, and they also engender increased loyalty and connection.”

Learn more about Her Retirement’s workplace solutions here

1Help in Defined Contribution Plans – 2006 Through 2012, Financial Engines and Aon Hewitt, May 2014.

What’s Your Retirement I.Q.?

Most Americans Fail Retirement Planning Literacy Quizzes…How Do You Compare?

Americans are woefully uninformed when it comes to retirement planning and more specifically when it comes to income planning, which is perhaps the most important planning you will do for your retirement.

At Her Retirement we believe that helping to educate individuals and families about retirement planning, investing, estate planning and other important financial topics is an integral part of helping people live the life they desire now and in retirement.

According to The American College of Financial services, roughly 75% of survey respondents failed a 38-question retirement planning quiz. In addition to the failure rate, only 6% of survey participants scored an A or B. According to David Littell, the Retirement Income Program Co-Director at The American College, “the results are alarming and a stark reminder of the need to be prepared for the decades in retirement when you are not earning a steady stream of income.”

The survey asked Americans aged 60-75 with at least $100,000 in investable a series of questions covering a variety of important retirement topics such as when is the best time to retire; how to maximize Social Security; employer-provided benefits, and how much can be safely withdrawn from a portfolio. All of these issues are deemed critical in the retirement planning process, particularly when planning income. The survey is similar to a 2014 survey in which the literacy results yielded similar results. The research surveyed a total of 1,244 Americans between February 16, 2017 and March 1, 2017. The literacy rate survey had a sampling error at the 95% confidence level of +/- 2.8%.

Although a majority of the respondents failed the quiz, many people perceive themselves to be much better educated on retirement planning topics than they really are. As an example, nearly two-thirds believed they were highly knowledgeable on the subject of retirement planning. Experts agree, this overconfidence could lead to retirement planning problems, as many believe they know more than they do when it comes to retirement planning.

Women faired more poorly than men (17% vs. 35% score) which is somewhat troubling for women as they face even greater retirement obstacles such a longevity and lower lifetime earnings. Those participants with higher levels of wealth and education fared better on the quiz. Littell noted that, “the drastic demographic differences are unsettling because all Americans – regardless of background – deserve to live out their retirement comfortably. This divide underscores how important it is for everyone to plan ahead.” These differences in affluence, education and literacy indicate the need for social programs to help all Americans have access to retirement education and planning resources.

In another recent retirement planning study by Fidelity, respondents were asked eight questions about retirement, including the estimated amount of savings they would need, what percentage of savings should be withdrawn each year, and how many years someone retiring at age 65 should expect to live in retirement. In addition to most of the participants getting the questions wrong, the study also proved that retirement myths and misconceptions hold many people back from having the right retirement plan in place.

So does retirement literacy really matter? And is it a determinant of retirement success? According to the research, it appears that retirement literacy leads to better planning, higher confidence, and improved retirement planning satisfaction. For those survey participants with a passing grade, they were most likely to have:

  • a long-term care plan in place
  • more likely to feel confident managing their own investment assets
  • more likely to have an estate plan
  • more likely to have a comprehensive written retirement plan, and
  • higher confidence in their assets lasting throughout retirement

So it’s clear that knowledge does lead to more confidence in retirement which leads to less stress, which leads to better health. We encourage everyone to learn more about retirement planning…sooner rather than later. There’s a myriad of things you should be doing to prepare for your retirement where time is your greatest asset.

In addition to making an effort to learn more, we believe that it’s important to seek out the assistance of a retirement specialist who can both guide you and implement a plan with the proper research-backed strategies. Before you hire anyone, make sure you do your due diligence, get referrals, talk to a number of advisors, check out their education and credentials, and understand how they are compensated. Read more about Why Her Retirement affiliated advisors are better here

 

Take the American College IQ Test Here

Take the Her Retirement IQ Test Here

Here’s the 8 Fidelity questions…Are you able to answer them?* Contact us for the answers (info@herretirement.com)

  • Question#1: Roughly how much do investment professionals estimate people save by the time they retire?
  • Question #2: How often over the past 35 years do you think the market has had a positive annual return
  • Question #3: If you were able to set aside $50 each month for retirement, how much could that end up becoming 25 years from now, including interest if it grew at the historical stock market average?
  • Question #4: Given the current average life expectancy, if you want to retire at age 65, about how long would you need your retirement savings to last?
  • Question#5: Approximately how much did the average monthly Social Security benefit pay in 2016?
  • Question #6: About what percentage of your savings do many financial experts suggest you withdraw annually in retirement?
  • Question #7: What do you think is the single biggest expense for most people in retirement?
  • Question #8: About how much will a couple retiring at age 65 spend on out-of-pocket costs for health care over the course of retirement?

*Fidelity Retirement IQ Survey, 2017

Five Questions about Long-Term Care

1. What is long-term care?

Long-term care refers to the ongoing services and support needed by people who have chronic health conditions or disabilities. There are three levels of long-term care:

  • Skilled care: Generally round-the-clock care that’s given by professional health care providers such as nurses, therapists, or aides under a doctor’s supervision.
  • Intermediate care: Also provided by professional health care providers but on a less frequent basis than skilled care.
  • Custodial care: Personal care that’s often given by family caregivers, nurses’ aides, or home health workers who provide assistance with what are called “activities of daily living” such as bathing, eating, and dressing.

Long-term care is not just provided in nursing homes–in fact, the most common type of long-term care is home-based care. Long-term care services may also be provided in a variety of other settings, such as assisted living facilities and adult day care centers.

2. Why is it important to plan for long-term care?

No one expects to need long-term care, but it’s important to plan for it nonetheless. Here are two important reasons why:

The odds of needing long-term care are high:

  • Approximately 70% of people will need long-term care at some point during their lifetimes after reaching age 65*
  • Approximately 8% of people between ages 40 and 50 will have a disability that may require long-term care services*

 

The cost of long-term care can be expensive:

For many, the cost of long-term care can be expensive, absorbing income and depleting savings. Some of the average costs in the United States for long-term care* include:

  • $6,235 per month, or $74,820 per year for a semi-private room in a nursing home
  • $6,965 per month, or $83,580 per year for a private room in a nursing home
  • $3,293 per month for a one-bedroom unit in an assisted living facility
  • $21 per hour for a home health aide

*U.S. Department of Health and Human Services, December 1, 2016

3. Doesn’t Medicare pay for long-term care?

Many people mistakenly believe that Medicare, the federal health insurance program for older Americans, will pay for long-term care. But Medicare provides only limited coverage for long-term care services such as skilled nursing care or physical therapy. And although Medicare provides some home health care benefits, it doesn’t cover custodial care, the type of care older individuals most often need.

Medicaid, which is often confused with Medicare, is the joint federal-state program that two-thirds of nursing home residents currently rely on to pay some of their long-term care expenses. But to qualify for Medicaid, you must have limited income and assets, and although Medicaid generally covers nursing home care, it provides only limited coverage for home health care in certain states.

4. Can’t I pay for care out of pocket?

The major advantage to using income, savings, investments, and assets (such as your home) to pay for long-term care is that you have the most control over where and how you receive care. But because the cost of long-term care is high, you may have trouble affording extended care if you need it.

5. Should I buy long-term care insurance?

Like other types of insurance, long-term care insurance protects you against a specific financial risk–in this case, the chance that long-term care will cost more than you can afford. In exchange for your premium payments, the insurance company promises to cover part of your future long-term care costs. Long-term care insurance can help you preserve your assets and guarantee that you’ll have access to a range of care options. However, it can be expensive, so before you purchase a policy, make sure you can afford the premiums both now and in the future.

The cost of a long-term care policy depends primarily on your age (in general, the younger you are when you purchase a policy, the lower your premium will be), but it also depends on the benefits you choose. If you decide to purchase long-term care insurance, here are some of the key features to consider:

  • Benefit amount: The daily benefit amount is the maximum your policy will pay for your care each day, and generally ranges from $50 to $350 or more.
  • Benefit period: The length of time your policy will pay benefits (e.g., 2 years, 4 years, lifetime).
  • Elimination period: The number of days you must pay for your own care before the policy begins paying benefits (e.g., 20 days, 90 days).
  • Types of facilities included: Many policies cover care in a variety of settings including your own home, assisted living facilities, adult day care centers, and nursing homes.
  • Inflation protection: With inflation protection, your benefit will increase by a certain percentage each year. It’s an optional feature available at additional cost, but having it will enable your coverage to keep pace with rising prices.

We offer a complimentary Long Term Care assessment, simply let us know your interest.

Before You Take Social Security…Do These 3 Things

When Should I Take Social Security…62? 67? 70?

Before you make your irrevocable Social Security filing decision you should do these 3 things:

  1. Read our Social Security Guide
  2. Request a Social Security timing assessment
  3. Use our “simple” Social Security timing quiz to get a sense of your timing. Remember however, as with any simple calculator, this quiz provides a direction to head in, but you’ll want a full assessment (coupled with other retirement variables in the assessment) to get an exact determination of this valuable benefit.

In our guide, you’ll learn:

  • Social security basics
  • Strategies for maximizing your benefit
  • Why taking Social Security at 62 may not be best option
  • How to limit taxes on your benefit
  • Strategies to maximize spousal benefits for married couples
  • The role of Social Security in a guaranteed income plan

Will Social Security Be Around When I’m Ready to Retire?

Social Security has had it’s share of changes over the years causing pause to those of us preparing for retirement. Up to 33% of your retirement income will come from Social Security so it’s a big concern when thinking about the future of this valuable benefit.

Social Security History

Social Security was started in 1935 as a means to provide an income benefit to older Americans who had little to no means of support. The country needed a social program to help these people and the economy.

Since this time, many changes have occurred giving rise to our collective concerns.

  1. The number of workers paying into Social Security (which funds the current benefit payments), has fallen from over 8 workers for every retiree in 1955, to 2.8 workers in 2015. That ratio is expected to fall to 2.3 by 2030. (1)
  2. Social Security morphed into an income program to include disabled workers and surviving family members. These added obligations (above and beyond contributions made by working Americans) were not matched with the required payroll deductions to financially support them.
  3. People are living longer…a lot longer. As can be expected, medical advancements and a consciousness to live healthier are leading to longer retirement spans, putting even greater strain on the system.

Since 2010, Social Security tax and other non-interest income haven’t fully funded the program’s cost. According to the Social Security Trustees 2016 annual report, this pattern is expected to continue for the next 75 years; the report projects that the trust fund may be exhausted by 2034, absent any changes. Should this happen, it’s estimated that current deductions may only be able to pay about 75% of promised income benefits. (2)

The crisis is real folks, however, history has shown us that the system will have some type of reform by our government officials. Under consideration are a number of ways to bring stability to the system, and to guarantee future benefits to all. These include:

  • Raising the Retirement Age: This has been done in the past to accomplish similar goals, and would save money by paying benefits to future recipients at a later age.
  • Increasing Payroll Taxes: An increase in payroll taxes, depending on the size, could add years of life to the fund.
  • Modifying Inflation Adjustments: Rather than raise benefits in line with the Consumer Price Index (CPI), policymakers might elect to tie future benefit increases to the “chained CPI,” which assumes that individuals move to cheaper alternatives in the face of rising costs. Using the “chained CPI” may make cost of living adjustments less expensive.
  • Taxing Benefits of Higher Earners: By taxing Social Security income for retirees in higher tax brackets, the tax revenue could be used to lengthen the life of the trust fund.

It’s clear, our new Trump administration will need to address Social Security reform and make some tough choices. However, history has shown us that our government does act on such matters when absolutely necessary. It’s now just a matter of not “if”, but when and how will the chances occur.

Claim a copy of our Social Security Guide

Check your Social Security Timing

Request a Complete Social Security Assessment

 

Health Insurance in Retirement

At any age, health care is a priority. When you retire, however, you will probably focus more on health care than ever before. Staying healthy is your goal, and this can mean more visits to the doctor for preventive tests and routine checkups. There’s also a chance that your health will decline as you grow older, increasing your need for costly prescription drugs or medical treatments. That’s why having health insurance is extremely important.

Retirement–your changing health insurance needs

If you are 65 or older when you retire, your worries may lessen when it comes to paying for health care–you are most likely eligible for certain health benefits from Medicare, a federal health insurance program, upon your 65th birthday. But if you retire before age 65, you’ll need some way to pay for your health care until Medicare kicks in. Generous employers may offer extensive health insurance coverage to their retiring employees, but this is the exception rather than the rule. If your employer doesn’t extend health benefits to you, you may need to buy a private health insurance policy (which may be costly), extend your employer-sponsored coverage through COBRA, or purchase an individual health insurance policy through either a state-based or federal health insurance Exchange Marketplace.

But remember, Medicare won’t pay for long-term care if you ever need it. You’ll need to pay for that out of pocket or rely on benefits from long-term care insurance (LTCI) or, if your assets and/or income are low enough to allow you to qualify, Medicaid.

More about Medicare

As mentioned, most Americans automatically become entitled to Medicare when they turn 65. In fact, if you’re already receiving Social Security benefits, you won’t even have to apply–you’ll be automatically enrolled in Medicare. However, you will have to decide whether you need only Part A coverage (which is premium-free for most retirees) or if you want to also purchase Part B coverage. Part A, commonly referred to as the hospital insurance portion of Medicare, can help pay for your home health care, hospice care, and inpatient hospital care. Part B helps cover other medical care such as physician care, laboratory tests, and physical therapy. You may also choose to enroll in a managed care plan or private fee-for-service plan under Medicare Part C (Medicare Advantage) if you want to pay fewer out-of-pocket health-care costs. If you don’t already have adequate prescription drug coverage, you should also consider joining a Medicare prescription drug plan offered in your area by a private company or insurer that has been approved by Medicare.

Unfortunately, Medicare won’t cover all of your health-care expenses. For some types of care, you’ll have to satisfy a deductible and make co-payments. That’s why many retirees purchase a Medigap policy.

What is Medigap?

Unless you can afford to pay for the things that Medicare doesn’t cover, including the annual co-payments and deductibles that apply to certain types of care, you may want to buy some type of Medigap policy when you sign up for Medicare Part B. There are 10 standard Medigap policies available. Each of these policies offers certain basic core benefits, and all but the most basic policy (Plan A) offer various combinations of additional benefits designed to cover what Medicare does not. Although not all Medigap plans are available in every state, you should be able to find a plan that best meets your needs and your budget.

When you first enroll in Medicare Part B at age 65 or older, you have a six-month Medigap open enrollment period. During that time, you have a right to buy the Medigap policy of your choice from a private insurance company, regardless of any health problems you may have. The company cannot refuse you a policy or charge you more than other open enrollment applicants.

Thinking about the future–long-term care insurance and Medicaid

The possibility of a prolonged stay in a nursing home weighs heavily on the minds of many older Americans and their families. That’s hardly surprising, especially considering the high cost of long-term care.

Many people in their 50s and 60s look into purchasing LTCI. A good LTCI policy can cover the cost of care in a nursing home, an assisted-living facility, or even your own home. But if you’re interested, don’t wait too long to buy it–you’ll need to be in good health. In addition, the older you are, the higher the premium you’ll pay.

You may also be able to rely on Medicaid to pay for long-term care if your assets and/or income are low enough to allow you to qualify. But check first with a financial professional or an attorney experienced in Medicaid planning. The rules surrounding this issue are numerous and complicated and can affect you, your spouse, and your beneficiaries and/or heirs. Visit our Medicare page in the Knowledge Center for more information.

Her Retirement offers a complimentary Medicare assessment to help you determine your strategy for claiming Medicare benefits and to make sure your health is protected in retirement.  Request an assessment with us today

The Importance of Long Term Care

“A person at age 65 has a 70% chance of needing some type of long term care during retirement, but fewer than 8% actually carry any type of long term care insurance.”

What would you do if you were suddenly faced with an additional yearly expense of $30,000 to $60,000 because of unexpected health care needs? Most Americans fear the financial consequences of a long-term illness and are unsure about how to protect themselves against it. What if your current health insurance policy only covered a small part of those costs? This also prompts the following questions:

  • How long could you afford these additional expenses?
  • How would these unexpected expenses impact the estate you hope to leave behind?
  • How would your lifestyle be affected while you are sick?

Long-term care insurance, which covers care received at home as well as care received in a nursing home, may be the right answer to these troubling questions. Long-term care policies can be an affordable and effective solution.

Long-term care is an important issue we could all potentially face. To depend on the government to pay these expenses—whether through Medicare or Medicaid—is not a feasible option. Medicare provides very limited coverage for long-term care, and Medicaid generally applies to only those with very limited assets. It’s important that you mitigate the risk of a Long Term Care event in your retirement plan.

Her Retirement offers a complimentary Long Term Care assessment to help you determine if it makes sense for you to purchase a policy. Our affiliated advisors also have strategies that help pay for your Long Term Care policy.  Request an assessment with us today

5QuestionsAboutLongTermCare

Visit our Long Term Care page in the Knowledge Center for more information

 

What is an Annuity & Why Should I Consider Them for My Retirement Plan?

Annuities can be a valuable component of your retirement plan and income during your retirement…depending upon your goals and objectives. Like all strategies we review here in our blog, we strive to provide objective, independent and truthful information.

What is an annuity and how can it benefit you? Annuity contracts are purchased from an insurance company. The insurance company will then make regular payments — either immediately or at some date in the future. These payments can be made monthly, quarterly, annually, or as a single lump-sum. Annuity contract holders can opt to receive payments for the rest of their lives or for a set number of years. The money invested in an annuity grows tax-deferred. When the money is withdrawn, the amount contributed to the annuity will not be taxed, but earnings will be taxed as regular income. There is no contribution limit for an annuity.

There are two main types of annuities:

  • Fixed annuities offer a guaranteed payout, usually a set dollar amount or a set percentage of the assets in the annuity.
  • Variable annuities offer the possibility to allocate premiums between various subaccounts. This gives annuity owners the ability to participate in the potentially higher returns these subaccounts have to offer. It also means that the annuity account may fluctuate in value. Indexed annuities are specialized variable annuities. During the accumulation period, the rate of return is based on an index.

Watch this video to learn more about Indexed Annuities and how they can help your retirement plan.

Case Study: Robert’s Fixed Annuity

  • Robert is a 52-year-old business owner. He uses $100,000 to purchase a deferred fixed annuity contract with a 4% guaranteed return.
  • Over the next 15 years, the contract will accumulate tax deferred. By the time Robert is ready to retire, the contract should be worth just over $180,000.
  • At that point the contract will begin making annual payments of $13,250. Only $7,358 of each payment will be taxable; the rest will be considered a return of principal.
  • These payments will last the rest of Robert’s life. Assuming he lives to age 85, he’ll eventually receive over $265,000 in payments.

Robert’s annuity may have contract limitations, fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. His annuity also may have surrender fees that would be highest if Robert took out the money in the initial years of the annuity contact. Robert’s withdrawals and income payments are taxed as ordinary income. If he makes a withdrawal prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies).

If you’d like to chat with an affiliated advisor about annuities and incorporating them into your retirement plan, let us know by requesting a 1-on-1 discussion. We’re happy to help.

 

How Much Annual Income Can Your Retirement Portfolio Provide?

Your retirement lifestyle will depend not only on your assets and investment choices, but also on how quickly you draw down your retirement portfolio. The annual percentage that you take out of your portfolio, whether from returns or the principal itself, is known as your withdrawal rate. Figuring out an appropriate initial withdrawal rate is a key issue in retirement planning and presents many challenges.

Why is your withdrawal rate important?

Take out too much too soon, and you might run out of money in your later years. Take out too little, and you might not enjoy your retirement years as much as you could. Your withdrawal rate is especially important in the early years of your retirement; how your portfolio is structured then and how much you take out can have a significant impact on how long your savings will last.

Gains in life expectancy have been dramatic. According to the National Center for Health Statistics, people today can expect to live more than 30 years longer than they did a century ago. Individuals who reached age 65 in 1950 could anticipate living an average of 14 years more, to age 79; now a 65-year-old might expect to live for roughly an additional 19 years. Assuming rising inflation, your projected annual income in retirement will need to factor in those cost-of-living increases. That means you’ll need to think carefully about how to structure your portfolio and your retirement plan to provide an appropriate withdrawal rate, especially in the early years of retirement.

Current Life Expectancy Estimates
MenWomen
At birth76.381.2
At age 6583.085.6

Source: NCHS Data Brief, Number 267, December 2016

Conventional wisdom

So what withdrawal rate should you expect from your retirement savings? The answer: it all depends. The seminal study on withdrawal rates for tax-deferred retirement accounts (William P. Bengen, “Determining Withdrawal Rates Using Historical Data,” Journal of Financial Planning, October 1994) looked at the annual performance of hypothetical portfolios that are continually rebalanced to achieve a 50-50 mix of large-cap (S&P 500 Index) common stocks and intermediate-term Treasury notes. The study took into account the potential impact of major financial events such as the early Depression years, the stock decline of 1937-1941, and the 1973-1974 recession. It found that a withdrawal rate of slightly more than 4% would have provided inflation-adjusted income for at least 30 years.

Other later studies have shown that broader portfolio diversification, rebalancing strategies, variable inflation rate assumptions, and being willing to accept greater uncertainty about your annual income and how long your retirement nest egg will be able to provide an income also can have a significant impact on initial withdrawal rates. For example, if you’re unwilling to accept a 25% chance that your chosen strategy will be successful, your sustainable initial withdrawal rate may need to be lower than you’d prefer to increase your odds of getting the results you desire. Conversely, a higher withdrawal rate might mean greater uncertainty about whether you risk running out of money. However, don’t forget that studies of withdrawal rates are based on historical data about the performance of various types of investments in the past. Given market performance in recent years, many experts are suggesting being more conservative in estimating future returns.

Past results don’t guarantee future performance. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.

Inflation is a major consideration

To better understand why suggested initial withdrawal rates aren’t higher, it’s essential to think about how inflation can affect your retirement income. Here’s a hypothetical illustration; to keep it simple, it does not account for the impact of any taxes. If a $1 million portfolio is invested in an account that yields 5%, it provides $50,000 of annual income. But if annual inflation pushes prices up by 3%, more income–$51,500–would be needed next year to preserve purchasing power. Since the account provides only $50,000 income, an additional $1,500 must be withdrawn from the principal to meet expenses. That principal reduction, in turn, reduces the portfolio’s ability to produce income the following year. In a straight linear model, principal reductions accelerate, ultimately resulting in a zero portfolio balance after 25 to 27 years, depending on the timing of the withdrawals.

Volatility and portfolio longevity

When setting an initial withdrawal rate, it’s important to take a portfolio’s ups and downs into account–and the need for a relatively predictable income stream in retirement isn’t the only reason. According to several studies done in the late 1990s and updated in 2011 by Philip L. Cooley, Carl M. Hubbard, and Daniel T. Walz, the more dramatic a portfolio’s fluctuations, the greater the odds that the portfolio might not last as long as needed. If it becomes necessary during market downturns to sell some securities in order to continue to meet a fixed withdrawal rate, selling at an inopportune time could affect a portfolio’s ability to generate future income.

Making your portfolio either more aggressive or more conservative will affect its lifespan. A more aggressive portfolio may produce higher returns but might also be subject to a higher degree of loss. A more conservative portfolio might produce steadier returns at a lower rate, but could lose purchasing power to inflation.

Calculating an appropriate withdrawal rate

Your withdrawal rate needs to take into account many factors, including (but not limited to) your asset allocation, projected inflation rate, expected rate of return, annual income targets, investment horizon, and comfort with uncertainty. The higher your withdrawal rate, the more you’ll have to consider whether it is sustainable over the long term.

Ultimately, however, there is no standard rule of thumb; every individual has unique retirement goals, means, and circumstances that come into play.

More ways to help stretch your savings

  • Don’t overspend early in your retirement
  • Plan IRA distributions so you can preserve tax-deferred growth as long as possible
  • Postpone taking Social Security benefits to increase payments
  • Adjust your asset allocation
  • Adjust your annual budget during years when returns are low

Tax considerations

Prolonging your savings may require attention to tax issues. For example, how will higher withdrawal rates affect your tax bracket? And does your withdrawal rate take into account whether you will owe taxes on that money?

Also, if you must sell investments to maintain a uniform withdrawal rate, consider the order in which you sell them. Minimizing the long-term tax consequences of withdrawals or the sale of securities could also help your portfolio last longer.

Her Retirement affiliates are available to provide complimentary 1-on-1 workshops to review your situation and to provide help in determining how much income your portfolio will provide. He/she can also complete a full Retirement Income Projection Analysis (RIPA) to give you some further insight into how long your current nest egg will last.

Yours, Mine & Ours: Estate Planning Strategies for 2nd Marriages

If you are one of the many Americans who are in a second marriage, you may need to revisit your estate strategy.¹

Unlike a typical first marriage, second marriages often require special consideration that should address children from a prior marriage and the disposition of assets accumulated prior to the second marriage.

Second Marriages

Here are some ideas you may want to think about when updating your estate strategy:

  • You may want to ensure that your children from your first marriage are set up to receive assets from your estate, even as you provide your second spouse with adequate resources to live should you die first.
  • Consider titling of assets. Assets that are jointly owned in your name and your second spouse’s name are set up to pass to your second spouse, often regardless of any instructions in your will.
  • If you are designating your second spouse as beneficiary on retirement accounts, remember, once you die the surviving spouse can name any beneficiary he or she chooses, despite any promises to name your children from a previous marriage as successor beneficiaries.
  • Consider any prenuptial and postnuptial agreements with a professional who has legal expertise in the area of estate management.
  • If your new spouse is closer in age to your children than to you, your children may worry that they may never receive an inheritance. Consider passing them assets upon your death, which may be accomplished through the purchase of life insurance.²
  • Consider approaches to help protect against the drain extended health care may have on assets designed to support your spouse or pass to your children.
  1. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
  2. Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2017 FMG Suite.

Should I retire now at age 62 and collect Social Security benefits, or should I wait until full retirement age?

There’s no right time to begin collecting Social Security benefits, but the age at which you begin receiving benefits will affect how much retirement income you have, so you should weigh the consequences carefully.

Keep in mind that if you collect Social Security before your full retirement age, your benefit will be permanently reduced. Depending on the year you were born, you’ll receive between 25 and 30 percent less per month if you collect benefits at age 62 than if you wait until full retirement age to begin collecting benefits. However, this doesn’t necessarily mean that collecting benefits at age 62 is unwise. In fact, unless you live to an especially old age, you may actually end up with more money ifyou start collecting Social Security benefits at age 62     than if you wait until full retirement age, because you’ll receive more benefit checks.

However, there are also good reasons to wait until full retirement age (or beyond)  to start collecting benefits.  For example, if you work full-time past age 62, you’ll have the opportunity to increase your  eventual retirement benefit, particularly if you are in your peak earnings     years, because your benefit will be figured using your 35 highest earnings years. Additionally, if you’ll barely scrape by after you retire, you may want to receive as much as possible from Social Security each month.   If you can wait past full retirement age to begin collecting benefits, you will receive delayed retirement credits (up until age 70) that will permanently increase your benefit.

Other things to consider include whether other people will be eligible to receive benefits based on your work record, your eligibility for     Medicare, your estimated life expectancy, and taxes. The Social Security Administration (SSA) has several online benefit estimators available at www.ssa.gov that can help you make an informed decision, and you can sign up at the SSA website for a my Social Security account so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor’s, and disability benefits. It also includes other information about Social Security that may help you plan for retirement. If you’re not  registered for an online account and are not yet receiving benefits, you’ll receive a statement in the mail every five years, from age 25 to age 60, and then annually thereafter. You can also talk to an SSA representative by calling (800) 772-1213 if you have questions. You can read more resources on Social Security and  request a Social Security Optimizer assessment from us at: https://herretirement.com/knowledge-center/social-security/