Creating Income in Retirement
By Max ValaVanis 321-956-7072
Guaranteed retirement income is gradually becoming a myth. If you are nearing retirement or recently retired, your generation is most at risk. Across the nation, the tides are turning, and your retirement income may not be where you need it to be.
What used to be a relatively simple task is now evolving into a mammoth undertaking if the investor is unwilling to seek proper guidance. Social Security was once a safety blanket that every retiree could rely on, and now it’s in danger of dis-appearing. The Social Security Administration itself stated that the program is only fully funded until the year 2034. With its potential collapse and the volatility of the markets, retirees are running out of options. As a result, our role as Financial Advisors is evolving to meet the changing long-term needs of our clients.
In the “Golden Age” advisors would select an income-producing investment tailored to the risk and time horizon of the investor. Now this tactic would barely outpace the effects of inflation. Furthermore, retirement income planning must factor in the growing longevity of the American retiree. According to the Society of Actuaries, for a couple who are 65 years old today there is a 50% chance that one of them will live to age 92! These factors, along with others, have changed the concept of the safe withdrawal rate.
The “Trinity Study” of 1998 popularized the concept of the 4% withdrawal rate. Commissioned by three university professors, this study essentially proved how to invest in the markets and not go broke while only withdrawing 4% annual-ly. At the time of publishing, this concept was relevant and ef-fective. This is not true for today’s economy, and we may never go back. For example, a 1-year CD in 1998 would return 5%. Today you would be lucky to earn 0.70%. Could you imagine limiting yourself to withdrawing less than 0.70% per year?
Retirement planning these days requires a departure from the old-school thinking of stockbrokers and mutual fund salesmen. Retirees must now understand it is possible to transfer the risk of going broke using revolutionary insurance products. Insurance companies and financial institutions have worked together to rewrite the playbook of lifetime income. They developed a way to reinstate the 5% to 6% withdrawal rate of the 1980s and 1990s. These methods ensure that retir-ees will never go broke. We use these programs in our office from some of the best financial institutions in the United States.
As an advisor, I use this playbook daily. We accomplish many goals in a relatively short period, such as guaranteed lifetime income, reducing income volatility, leaving a legacy, social security claiming, tax reduction, and planning for unex-pected healthcare expenses. Many seasoned stockbrokers and mutual fund salesmen will avoid these issues. Their firms don’t want that form of business as it is more profitable for them to push risky, market-based investments that trade often.
Although the path to a healthy retirement may be differ-ent, it’s not as intimidating once a plan is developed. If you are recently retired or are nearing retirement, you may be in a perfect position to take advantage of these new income plans that you can’t outlive. If this interests you, give us a call. We will review your financial footprint and analyze whether you’re a candidate for an income plan that maximizes your retire-ment income.
Max ValaVanis is a co-owner of Valavanis Financial in downtown Melbourne and in Rockledge. Max specializes in lifetime income planning for Retirees while protecting principal. Max can be reached at 321-956-7072.