CREATING INCOME IN RETIREMENT
By: Max ValaVanis, CFPⓇ, CFS
For nearly a century pension plans were the backbone to the American retirement system. Millions of retirees relied on the steady income flowing from their former employer’s pensions as they aged. This opportunity has since diminished to only 11% of the private workforce according to the Pension Rights Center. If you are nearing retirement or have recently retired, this important piece of the retirement pie is likely missing! Across the nation, most retirees now have to develop complex and potentially risky plans to compensate for their lack of income. However, there are still options available for seniors to potentially develop their own pensions.
Having a guaranteed income used to be a relatively simple task, but now it’s evolving into a mammoth undertaking. Social Security was once a safety blanket that every retiree could rely on, and now its benefits are in danger of being eroded. The Social Security Administration itself stated that the program is only fully funded until the year 2034. This, coupled with the volatility of the stock markets, means that retirees are struggling to find sufficient and reliable income. As a result, our roles as Financial Planners have adapted to meet the changing long-term needs of our clients.
Retirement income planning must also take into account the increasing longevity of American retirees. According to the Society of Actuaries, for a couple who is 65 years old today, there is a 50% chance that one of them will live to age 92! These factors, along with other considerations, changed the landscape of income planning.
You may have heard of the “Trinity Study” of 1998 which popularized the concept of the 4% withdrawal rate. This study, commissioned by three university professors, essentially proved how to invest in the markets and not go “broke” while only withdrawing 4% annually. At the time of publishing, the concept was relevant and effective. Now, according to the founder of this concept, William Bengen, new research suggests the same is not true for today’s economy.
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 innovative insurance products. Insurance companies and financial institutions have worked together to modernize lifetime income. They developed a way to reinstate the 5% to 6% withdrawal rate of the 1980s and 1990s. This can help ensure that retirees will always have income for as long as they live. We use programs in our office from some of the best financial institutions in the United States.
As an advisor, I use this playbook to help achieve many goals for our clients. Goals such as guaranteed lifetime income, reducing income volatility, leaving a legacy, social security claiming, tax reduction, and planning for unexpected healthcare expenses. Many seasoned stockbrokers and mutual fund salesmen may avoid these issues, focusing purely on investments. As a Certified Financial Planner, we take on a fiduciary responsibility to always focus on what is best for you.
If you are recently retired or are nearing retirement, you may be in a perfect position to take advantage of new income plans that you can’t outlive. If this interests you, You can call our office at (321) 956-7072. We offer a free consultation for all Senior Scene readers where we will review your financial footprint and analyze whether you’re a candidate. Although your path to a healthy retirement may be different, it does not have to be intimidating.
Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors, Inc. (JWCA). ValaVanis Financial and JWC/JWCA are unaffiliated entities.