• September 2012

Will You Run Out of Money Before You Run Out of Life?

By Sheldon Weiner
Financial Advisor/Partner
Egan, Berger & Weiner, LLC

If you are concerned that during your retirement years your money will run out, you are not alone.

Surveys suggest that more than 67 percent of Americans are worried about not having enough money for retirement, according to seniorsite.com, and of those, 61 percent fear outliving their money more than they fear death.1

Here’s why:

1. Pensions and Social Security checks used to be the main funding for retirement. Now, people have to rely more on their personal assets to fund retirement to ensure that their income lasts as long as they do. With an average life expectancy of 78 ½ years, we now live more than a decade longer than we did in 1950, yet retirement age has increased just two years—to age 67.2

2. The US Census Bureau reports that more than 50 percent of Americans anticipate working through retirement due to financial and healthcare needs. In 2008 roughly 33 million Americans were between the ages 55 and 64, and that number is expected to reach 43 million by 2020.

3. Asked about expected sources of income in retirement, 94 percent of Baby Boomers say they expect Social Security to be a major part of their income. They also thought pension plans (46%) and 401K-type plans (43%) would also pay a major part in their retirement income.6 However, 30 percent indicated they expect some of their retirement income to come from part-time work. Respondents expected only 9 percent to come from inheritances, and 11 percent from other sources.3

4. Retirement planning is further complicated by a turbulent economy. With the unemployment over 8 percent, and US corporate pension plans underfunded by $217 billion in 2008, industry experts know that there are more obstacles to a successful retirement than ever before. According to a 2011 survey by CareerBuilder, 76 percent of workers plan to rely on Social Security as a source of income in retirement, but only 35 percent of Americans expressed confidence in the future of Social Security.5

5. Rising inflation rates can quickly erode a retirement portfolio, making the fears a reality. At a 4 percent inflation rate, the cost of living will double in only 18 years. You must also take in to account the average years in retirement, which now approaches 20 years. In the 1980s, over 65 percent of Americans had a pension plan at work. But now, research shows that less than 18 percent have a pension plan—and most of those who do are government, state, and military personnel.4

6. Where our parents thought they needed their income to last maybe 10 to 12 years in retirement, seniors today can expect to be in retirement twice as long. In fact, the Employee Benefit Research Institute forecasts the duration for many could last 25 to 30 years, or maybe even 35 years. Attribute this trend to progress in medical practices, improved diets, exercise, and improvements in the standard of living. But the Census Bureau confirms that retirement plans that worked for our parents do not work for the current generation. Statistics show us there are more than 90,000 Americans over age 100. Even more shocking, 2 million Americans are now in their 90s.2

With all of these problems, what can individuals do to help themselves along the path of retirement security?

Here are some ways to ensure you’ll have enough income to last your lifetime:

  • Plan for the possibility of working a few years longer than the traditional retirement age of 65. Although most of us do not want to do that, it has become a necessity for many.
  • Ramp up your rate of savings. Additional Seniorsite.com studies show us that 43 percent of Americans have less than $10,000 saved for retirement. We must utilize our 401K, IRAs, and Roth IRAs to increase our nest eggs.
  • Consider insuring your retirement income against the risk of longevity and market uncertainty. There are guaranteed lifetime income products that can help to ensure against these risks. Also, people who are the primary income earners for the family should carry adequate Life and Disability, and Long-Term Care Insurance to protect both their families and their own retirements.
  • Make sure that your retirement plans as are well-diversified and make use of asset-allocation strategies. Today we know the use of alternative investments may actually raise your returns and lower the risk.
  • Map out your retirement strategies before you actually retire. Know where your income is going to come from and how you will continue to develop it. You can choose from such strategies as systematic distributions from well-allocated mutual funds or from managed payout funds. The use of variable or fixed annuities, with their many new guarantees, can also be beneficial in retirement planning. And keep in mind the required minimum distributions that you must begin to take out of qualified plans when you reach age 70½.
  • Most importantly, seek the counsel of a trusted financial advisor. Individuals should work with a Financial Planner for help in making the many important retirement planning decisions and seeking retirement income that fits their needs. A professional Financial Planner can keep up with new strategies, products and tax laws that the average person cannot. With 10,000 people retiring every day over the next 20 years, it is never too late to begin planning. Seek help, come up with a well thought-out plan, implement the plan, and enjoy a very successful healthy and wealth retirement.

Sources:


About Sheldon Weiner

A founding partner of Egan, Berger & Weiner, LLC, Sheldon Weiner, LUTCF, has more than three decades of experience in the financial industry. After graduating from the University of Maryland, and the Hartford Insurance Company School of Advanced Underwriting, he earned the LUTCF (Life Underwriter Training Council Fellow), and also served as president of Creative Financial Programs, Inc.

Weiner has 10+ years of experience as a teacher and lecturer for various educational institutions in the area, and is an active member of the Financial Planning Association.

For more information, and to contact Weiner, send him an email at sweiner@ebwllc.com or call 703-506-0030 ×106.

_Securities and Investment Advisory Services offered through Voya Financial Advisors, member
SIPC. Egan, Berger & Weiner, LLC is not a subsidiary of nor controlled by Voya Financial Advisors._

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