How Long Will Your Money Last in Retirement?

Charisse Smith | June 20, 2014 | Retirement Planning

Longevity is on the rise, and with increasing life expectancies, many people are running into the problem of outliving their savings. If we hit a major inflationary period, you could very well run out of money faster than expected. The problem lies not in when you will run out of money, but which vehicle offers the guarantee that you won’t outlive your money and allows for growth opportunities.

Many retirees may need to start rethinking the way of the 1980s, when the norm was accumulation and buy-and-hold. As you’re getting ready for retirement, it’s time to start thinking about an income stream and diversifying for inflation. You have accumulated your whole life, and now it’s time to sit back, relax, and decide what amount you need for monthly bills, traveling, and extras.

So, how do we do this?

Start by looking at the 21^st-century annuities. I’m talking about the new-age hybrid annuities. I know; I’m just another person selling annuities. But in reality, it might be some of the best advice that comes across your path, and you should know why there is such hype for these retirement vehicles and why they have gained popularity over the last few years. There are good and bad annuities, and it all depends on your needs. Wouldn’t you like to take half of your retirement accounts and/or savings and know a percentage of your money will last as long as you do? How about an annuity that participates in a portion of a commodity index? Commodities are risky investments, but when placed within an index in an annuity, there is no market risk. Talk about helping provide a potential inflation hedge. How would you like a piece of that action without worrying about market loss?

Why annuities?

Let’s look at the Annuity 101 basics. I like annuities because they are tax-deferred, are probate-protected in most states, and can provide an income for life. When you get ready for retirement and your employer gives you a pension, can you guess what they are giving you? It’s very similar to an annuity. As you look at the potential tax benefits of annuities, there is the possibility that, as you take income from certain annuities, only a certain percentage will be taxable to you. Every case might be slightly different, but I think you get my drift.

Is there an alternative to paying for long-term care?

The mainstream thinking today is, “If I don’t use it, I don’t want to lose it.” People sit down with me every day to do a financial checkup, and many don’t have home health care or long-term care policies. At a certain point in life, it can become too expensive and/or your health gets worse, so finding coverage can be a major challenge. Guess what? There are annuities and riders available that not only provide you an income stream for life but also the ability to double your income for up to five years, when you need to start dishing out funds for long-term care or home health care expenses. This way, hopefully you won’t have to start digging into your other assets to pay for your care, and you can leave something to your surviving spouse or children. I know what you’re thinking at this point – that I’m a “mad woman” – but it’s true.

I have one client who has a long-term care policy, and he put a small part of his retirement savings totaling $200,000 into one of these products. Based on the assumption that he will need it in 10 years, the $200,000 would pay him $50,000 annually for five years. After five years, the annuity would pay $25,000 for the remainder of his and his wife’s lives, in the case that she lives 10-20 years longer than him. This is a no-brainer, folks. You might be wondering why he would buy this type of policy if he had a long-term care policy. In many cases, long-term care policies don’t cover all of your care. You usually have to pay out-of-pocket somewhere, especially if the agent who sold it to you did not set it up correctly, which was the case for my client. On the other side of the spectrum, if he passes away and does not use it, his beneficiary will get a lump-sum death benefit that has compounded over all of these years. I call it the miracle of compounding, and not enough retirees have this in their portfolios.

“Out of sight, out of mind” thinking is the way of the past. Don’t let that way of thinking cripple your retirement and legacy. If you want to protect your financial health, give Zinnia Wealth a call, ask some questions, and schedule a free financial checkup. The worst thing that could happen is that I fatten you up with some of our warm, homemade Otis Spunkmeyer cookies when you leave.

For information on six reasons to consider inflation protection while in retirement, go to ZinniaWealth.com and click on the Fortune magazine logo, or call our office at 352-368-3680.

Guarantees apply to certain insurance and annuity products (not securities or variable or investment advisory products), including optional riders and benefits, and are subject to product terms, exclusions and limitations, the insurer’s claims-paying ability, and the financial strength of the issuing insurance company. Although it is possible to have guaranteed income for life with an annuity, there is no assurance that this income will keep up with inflation.

Investment advisory services offered through Zinnia Wealth Advisory, LLC, a Registered Investment Advisor in Florida. Insurance products offered through Zinnia Wealth Management, LLC, FL License #L078655. Zinnia Wealth Advisory, LLC and Zinnia Wealth Management, LLC are separate entities.

 

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