Category: Retirement Planning

Get a Second Look Before Buying an Annuity or Your Money May Be Held For Ransom

Get a Second Look Before Buying an Annuity or Your Money May Be Held For Ransom

Two clients of mine, a couple, came into my office one morning, and they mentioned they were heading over to meet with a financial advisor about their Equity Indexed Annuity after their appointment with me. Just as a fair warning, I shared with them what I have learned about the dangers of some annuities, making it a point to mention that some have steep surrender penalties that can extend anywhere from 7-17 years. What I didn’t know then is that they can be even worse than that.

 

They seemed surprised. Why hadn’t their advisor mentioned those downsides? They would ask him, they concluded, and then come back to finish up some business with me.

 

They did come back, and with some very concerning news. “He made it sound like we could never take all our money out without penalties,” they said.

 

And now they surprised me. I asked for their disclosure document, researched the product, and—to my frustrated astonishment—found it to be true: this annuity was basically holding their money for ransom.

 

You see, according to the rules of this particular EIA, they can never take out their money as a lump sum. Even after they have passed away, their kids will not be able take out their money as a lump sum either. The only way the couple can is by taking it out 10% each year for ten years after a five-year deferral period.

If they refuse to play by those rules and take out their money as lump sum anyhow, the penalties would eat up all their returns, bonuses, and more. They would only get $164,555, which is $61,859 less than their account value of $226,414 and about 10,000 less than what they originally paid into the annuity five years ago! In other words, they would have lost 27% of their money after having been invested for five years.

 

This illiquidity might be tolerable if the returns were decent, but that is not the case with their annuity. It has a cap of 3%. This means that no matter how good the markets are, the most return they can get is 3%. Period. All in all, this is a terrible deal.

 

Now, this is not to say that all annuities are bad or that all of them will tie up your money like this one will. But this example does serve as a warning that you can hardly be too cautious around these complicated products. Why? Because annuity salesmen (even those who call themselves “financial advisors”) may not tell you about these downsides.

 

My clients were not told about these penalties. Instead, they were sold on the guarantees, the promises of market returns without market risk and an upfront 10% bonus. Then, with a skewed perception of what they were getting themselves into, they signed away full rights to their money forever.

 

So, before you sign anything, I always recommend getting a second opinion, just to make sure the annuity is being portrayed as it really is. I am convinced that if all the pros and cons were laid bare, significantly fewer people would purchase them.

 

Thinking about getting into an annuity? Call Seniormark at 937-492-8800 and a Certified Financial Planner will give you a second opinion on whether or not it is right for you!

 

Do I Need To Do Anything To Enroll in Medicare?

Do I Need To Do Anything To Enroll in Medicare?

This is a question I get quite frequently at my offices in Sidney and Vandalia, Ohio. When it comes to Medicare, soon-to-be retirees know that they’ve been paying for it since they started working through Social Security. However, they often don’t know how they collect the benefit they’ve worked so hard to earn.

 

Does it just happen automatically? Or do soon-to-be retirees like you need to do something?

 

Well, that depends on one thing…

 

Are You Already Receiving Your Social Security Benefit?

If you decided to claim your Social Security benefit before 65, then you don’t have to sign up. Your Medicare card will arrive in the mail around your 65th birthday and you will be automatically signed up for Medicare Parts A and B.

 

If Not, Make Sure You Sign Up!

But if you are not receiving your Social Security benefit, you need to sign up during your open enrollment period, the seven-month period surrounding your 65th birthday. You will be doing yourself a big favor by signing up on time because there are many late enrollment fees. For example, the Part B penalty is 10% for every year you are late. Unfortunately, this penalty will continue for the rest of your life.

 

So take the time amidst retirement planning and birthday celebrations to sign up. You can sign up online at ssa.gov or you can call or stop by your local Social Security office. If you live near Sidney, that office is in Piqua, 227 Looney Rd.  If you live somewhere else in Ohio, find your closest location here:  Ohio Social Security office locations.

 

Everyone’s Got a Lot More to Consider!

But whether or not you have to sign up for Medicare, you are far from done. It is a big misconception (see our blog on this here) to think that original Medicare alone is enough to cover all your health care expenses. There are two things you should do. Firstly, it is almost always a good idea to pick up a stand-alone prescription drug plan through Part D of Medicare. Otherwise, you will have no coverage for your medications. In addition, I also recommend finding some way to supplement Medicare with additional insurance. You can get a Medicare Supplement plan, or—for those who are more cost-conscious—a low to no cost Advantage plan.

 

As you can see, even though you may not have to do anything to sign up for Medicare, signing up is just the first step before you have your health insurance in order. I recommend seeing an advisor to help guide you through this complex process.

 

Need help navigating Medicare? Want personal help to find a plan that is right for your needs and pocketbook? Call Seniormark at 937-492-8800 for a free consultation!

 

Why the Guaranteed Income of an Annuity Isn’t Always Worth It For Retirees

Why the Guaranteed Income of an Annuity Isn’t Always Worth It For Retirees

Everyone likes a guarantee. It’s like a warm house that shelters us from the cold, unknown outside of diminishing returns and tragic losses. So, for the retiree, someone like you who has a lot to lose, the idea of your income being unaffected by market fluctuations sounds inviting. The assurance that you won’t ever outlive your assets wraps itself around you like your favorite blanket.

 

But sometimes a guarantee isn’t worth what it is costing you. And sometimes the world outside the guarantee is a little bit sunnier than you might think.

 

I have found this to be the case with retirement investments. Annuities in general—indexed, variable, and others— often do not live up the glory of their sales pitches, and the world of a conservative investment portfolio with a financial advisor is not nearly as cold and harsh as some might assume.

 

Let’s start by looking at some of what you are giving up by going with an annuity. Because I’ve found that my clients are less enamored by these products once they see beyond the warm and fuzzy sales tactics.

 

Access to Your Funds

No matter how you parse it, you are giving up liquidity by choosing an annuity.  When you invest your money in an annuity, you are giving up your rights to access your money as a lump sum as the annuity gives you your set dollar amount of income every month. They are kind of like a parent, giving you an allowance for monthly expenses, but scolding you with penalties for taking out too much too fast. Although they will allow you to take out up to 10% per year, more often than not, you will incur a 10-15% penalty for taking out any more than that.

 

This might not seem like a big deal if you aren’t planning on any big purchases anytime soon. However, this can change on a dime. What if you come across a real estate steal for a snowbird home in Florida? Or what if you find a promising investment and cannot take advantage of it because your “parent” company will slap you on the wrists for accessing your own money? Then you might start to feel a bit smothered.

 

But if the lack of freedom doesn’t drive you crazy, I think what I am going to explain next will.

 

Fees and Returns

This is where the rubber meets the road when it comes to investments. If you aren’t making money with your money, then it is hardly worth it to invest. And, unfortunately, the truth about annuities is that the return is not all that great. Sure, agents make it sound nice with the guaranteed 5% income or maybe a 10% bonus in some cases, but the return (how much money you are really making) is a lot less flashy. Why?

 

There are a lot of really complicated reasons, but the most drastic one is the draining fees. From the typical annuity options I have come across, the total comes to about 3-4% when you add up all the insurance, rider, and mutual fund fees. Now…that percentage does not sound like a lot when you see it printed on the contract. But the effect it can have on your nest egg over your life expectancy is shocking, especially when compared to the fees of other financial advisors, which are typically 1-2%.

 

For an example, Let’s say you are investing a  $100,000 portfolio, and let’s say this portfolio averages a hypothetical 5% return over twenty years (a typical life expectancy for those heading into retirement). The annuity with its fee of 3% will allow your nest egg to grow to $168,595. Not too bad, right?

 

But how does that figure sound when you compare it with $219,112, the dollar amount you would have with a financial advisor who charges 1% in fees? That is over a $70,000 difference, a difference based off only a couple measly percentage points.

 

It’s also the difference between the warm security of an annuity and the few brave steps out into the world of a conservative portfolio.

 

The Air is Fresher Outside

Although I understand the hesitation, it is really not that cold or scary outside of that guarantee as long as your portfolio is conservative and diversified sufficiently. It is easy to look at recessions and stock market crashes and worry about running out of money in retirement, but even then a conservative portfolio can save you from any devastating losses.

 

For a solid example, I like to point to the recession surrounding the stock market crash of 2008, often called the lost decade (January 1st, 2000—December 31, 2009). Even during this severe downturn, when the market was consistently in the negative, the conservative funds we manage were still averaging 6.23% per year after managing fees. Even the most aggressive funds we manage were still making almost over 2% per year on average. Of course, that isn’t a good return by any means, but it sure isn’t doomsday. It’s more like a chilly breeze than a devastating snowstorm.

 

So, when it comes to retirement investing options, I recommend stepping out into the sunshine. Your nest egg needs some vitamin D to grow up big and strong.

 

Want a Certified Financial Planner to analyze your portfolio at no cost to you? Call Seniormark at 937-492-8800 for a free consultation.

I’m Retiring Soon: Will Social Security Be There For Me?

I’m Retiring Soon: Will Social Security Be There For Me?

Over recent years, there’s been a lot of chatter about Social Security’s financial future. And let’s just say that the discourse has been a little, well, over-the-top. Politicians have been ranting about Social Security going broke, acting like—if we don’t overhaul the system in the next 20 minutes—it’s as good as gone. Jeesh. They’re practically the doomsday preppers of retirement finances.

 

My advice to you: Don’t let their sensationalism bother you too much. This just isn’t the truth. There’s some truth in there for sure, but—for the most part—it is just causing a lot of unfounded fear.

 

To begin debunking those unfounded fears, I need to start with a quick explanation of how Social Security works.

 

How Social Security Works

Founded during the aftermath of the Great Depression, Social Security started to keep elderly people out of poverty in their retirement. It was set up as a “pay-as-you-go” program in which the workforce surrenders a portion of their income in payroll taxes to fund Social Security benefits for the current retirees. Then—when that workforce retires—the next generation of workers bears the burden to fund their benefits.  This cycle continues indefinitely, a constant influx of funding coming from the payroll taxes of the working American in order to pay for their elder’s retirement.

 

Do you see the implications? This means that Social Security can never run out of money completely. In fact, the only way this would happen is if the workforce decided that making money isn’t worth it anymore and paying taxes is optional. In other words, it’s not likely.

 

Of course, just because it can’t go broke, doesn’t mean it doesn’t need to be fixed in some respects.

 

The doomsday preppers aren’t completely off their rockers. Social Security isn’t perfect. Sometimes the funding from taxpayers is not enough to fulfill the promised benefits.

 

This is what is happening now. Although the government built up a surplus in a trust fund to prepare for the retirement of the baby boomer generation, the sheer number of retirees has proved too much. The trust fund is set to run out in 2034 (according to the S.S. Trustee report of 2017), leaving Social Security unable to pay the full benefit.

 

But please note, I didn’t say that it won’t be there at all. The trust fund might be going broke, but Social Security is not! By payroll taxes alone, 77% of benefits can still be delivered.

 

Now that’s still not fun. No one wants a reduced check. But this is considering that the government does nothing. They can increase the full retirement age, and they can increase payroll taxes a little bit.

 

Slowly But Surely

But whatever they do, it very likely won’t be all at once. It is not like you will get slammed out of nowhere with a 23% decrease in Social Security benefits.

 

Just take a look at how the government handled changing the full retirement age to keep Social Security solvent. Starting in 1983, congress set legislation in motion that was designed to increase the full retirement age from 65 to 67 in tiny increments. It is now 33 years later and—for the people retiring soon (like you)—the full retirement age is still only 66 and 2 months. After all that time, we are only half way there! In my opinion, it will be the same thing with any decrease in benefits or payroll tax hike.

 

The point is—for the people currently collecting Social Security and for those who are considering taking benefits soon—you’ve got very little to worry about it. Social Security may need a few tweaks, but it is not nearly as ruined as what the doomsday-ers are saying.

 

Will You Be There For Yourself?

In fact, what you should be more concerned about is where the rest of your retirement income is coming from. Social Security was never meant to cover all of the expenses of your retired life. You need extra funds, extra income to ensure that you can retire comfortably for your entire life expectancy. In other words, you have some planning to do as you approach retirement…some advisors to see, some decisions to make.

 

It seems that the question is not as much whether or nor Social Security will be there for you, but rather…will you be there for yourself?

 

Need a Certified Financial Planner to help you transition from employment to retirement? Call Seniormark at 937-492-8800 for a free consultation!

Know Your Rights! (Your Medicare Supplement Guaranteed Issue Rights)

Know Your Rights! (Your Medicare Supplement Guaranteed Issue Rights)

Everyone knows that they have the right to remain silent and the right to an attorney, but few retirees know their rights to a Medicare Supplement policy. For this reason, many people believe that if they missed their Open Enrollment Period and have health problems, they will be unable to get insurance.

 

This is not so. Thanks to guarantee issue periods, retirees like you have rights. During guaranteed issue periods, insurance companies are obligated to offer you a policy at the normal rate and cover your pre-existing conditions. All of this with no pesky medical questioning whatsoever!

 

The following circumstances spur a guaranteed issue period. In other words, you have the right to a Medicare Supplement policy if:

  • Your Medicare Advantage Plan is going out of service or you are moving out of the service area.
  • Your employer health insurance is ending.
  • You’ve been enrolled in an Advantage Plan for less than one year and want to switch back to a Medicare Supplement plan.
  • You lose your coverage without fault (i.e. your insurance company goes bankrupt).
  • Your insurance company misled you or doesn’t follow the rules.

(For a more comprehensive chart of potential situations, click here to visit Medicare.gov).

 

From the day any one of these events happen to you, you have 63 days of guaranteed issue to get into a new Medicare Supplement Plan.

 

Do not take this newfound information lightly, and keep any proofs of the previously mentioned events at your disposal such as:

  • Claim denials
  • Letters from employers
  • Official notifications

 

Insurance companies will ask for these items to prove your right to a policy. Then they will have no choice but to insure you. This is why it is so important to educate yourself on your rights. It allows you to take advantage of what has been made available to you.

 

If you want to find out more about guaranteed issue rights or need help shopping a Medicare Supplement Plan for your needs, Call Seniormark at 937-492-8800 for a free consultation from licensed experts.

What Is My Full Retirement Age? (And Why Does It Matter to My Social Security Check)

What Is My Full Retirement Age?

(And Why Does It Matter to My Social Security Check?)

 

Laws, guidelines, tax codes, regulation, health care—pretty much everything involved with the government—is constantly evolving. And the full retirement age is no different.

 

Life expectancy has been rising. So that means that retirees are drawing on their Social Security for much longer than they used to. Couple this with shockingly high spending for other programs, and you’ve got yourself a little budget problem on your hands. Social Security has to remain solvent somehow!

 

This is why the full retirement age is creeping up. Ever since Ronald Reagan signed the 1983 Social Security Act amendments, the government has been inching its way to a full retirement age of 67, like peeling off a Band-Aid nice and slow.

 

But What’s My Full Retirement Age?

Your full retirement age depends on when you were born. The younger you are, the closer your full retirement age will be to 67. But if you’re retiring soon, your full retirement age is likely 66. Check out this chart from SSA.gov to find out for sure:

 

Why Does it Matter to My Social Security Check?

Your full retirement age is when you qualify for full Social Security benefits (not to be confused with your Medicare eligibility)[LINK TO WARNING: CONFUSING MEDICARE AND SOCIAL SECURITY ELIGIBILITY]. You can apply as early as age 62, but you will receive reduced benefits, only 75% of what you would’ve received had you waited until your full retirement age.

 

But there’s another side to this coin. You can also delay your benefits, leading to bigger benefits. For every year you delay beyond your full retirement age, you get an extra 8% tacked onto your Social Security check every month.

 

These options leave a lot up to you, and I wouldn’t take them lightly. Deciding when to start your Social Security takes a lot more than just understanding your full retirement age; it calls for a carefully planned strategy, another step along the way to a successful retirement.

 

Looking for some strategies to help you get the most out of Social Security? Click here.

3 Reasons to Start Medicare Planning NOW!

3 Reasons to Start Medicare Planning NOW!

Every last one of us is pretty much the same in this respect: we don’t take now for an answer. When the task is daunting, overwhelming, or complex, we always manage to escape doing it now by putting it off for tomorrow. We’re like a gaggle of Houdinis. Just when you think time constraints have us trapped, we magically free ourselves into an enchanted tomorrow land of channel flipping, Internet surfing, and power naps.

 

But some things are just too important to put off. Even for one more day, one more catnap, one more rerun of I Love Lucy. Medicare planning is one of these things. Not convinced? Here are three reasons why you should start the Medicare planning process now:

 

Reason #1 Mistakes Happen

Glitches. Mistakes. Goofs. If there is a way something can go wrong, Lord knows it probably will. Just like a customer service call can turn into several hours of God-awful hold music, a small slip-up in the Medicare process can turn a five minute solution into a month long ordeal.

 

This is because you are just one of the 10,000 people turning 65 everyday. Medicare has a lot to handle; little things can slip through the cracks. Even if you are fortunate enough to not make any mistakes, you still have to plan in advance for theirs.

 

Reason #2 You’ve Got a Ton of Decisions to Make

Do you need a med sup? Or should you go the Medicare Advantage route? Should you sign up now? Or wait until you are done working? When are the deadlines? What are the penalties? What is a donut hole and how do I navigate it?

 

Take these questions along with deciding between 24 drug plans, 11 supplement plans and a legion of Medicare Advantage options, and you’ve got yourself a to-do list you can’t leave until the last minute.

 

Reason #3 Your Hairdresser Is Not a Retirement Advisor

Getting advice from your family or friends over coffee at church or in-between hands of euchre won’t cut it.  And no, your all-knowing hairdresser won’t do either.   Although your loved ones and acquaintances may have your best interests at heart, they simply do not know the ins and outs of Medicare. What was right for them may not be right for you. And what they overheard at the grocery store is (gasp) probably not watertight advice.

 

This is why seeing an expert is a great (dare I say the only) way to make sure you are on the right track, ensuring you a smooth, penalty-free transition to retirement. But you may find it difficult to schedule an appointment if you wait last minute. We will still help you out, of course, but it will save you a lot of stress to plan an appointment weeks or months ahead.

 

So—when should you start the Medicare Planning process? If you are within 6 months of turning 65, the answer is…you guessed it…Now!

 

Well……

Maybe not now, right?

 

Not sure what to do next? Give us a call at 937-492-8800 for a free consultation!

The #1 Investing Mistake Soon-to-be Retirees Make

The #1 Investing Mistake Soon-to-be Retirees Make

I’ll cut right to the chase. The #1 investing mistake soon-to-be retirees make is investing like a 25-year old. Although age is but a number in most respects; in this case, it is so much more. It affects investment strategy. And, in turn, it affects another very important number to you: your retirement savings.

 

From Growth Emphasis To Preservation Emphasis

Here’s why. Age should affect your approach to risk. As you get older, your portfolio should evolve from one that emphasizes growth to one that emphasizes preservation. This means that—as you approach 65—you should avoid risky and aggressive investing strategies in favor of a more conservative approach.

 

Aggressive strategies work well for the previously- mentioned 25-year old because in his “growth-minded” portfolio, he has time to recover from losses. Those drops in in the stock market will eventually even out over the long haul of his working life. In other words, the risk will eventually reap reward.

 

But you don’t have a long haul anymore. Your nest egg can’t afford to suffer any catastrophic losses because you simply don’t have the time to recover. It’s true! Now is the time for more bonds and less stocks. It’s time to roost on that nest egg. At this point in life, high risk does nothing but set you up for a great fall.

 

Remember the Financial Crisis of 2008?

It was a bleak time for everyone, but especially for soon-to-be retirees. According to the U.S News and World Report, retirement savers suffered 2 trillion in stock market losses!

 

Imagine the regret as soon-to-be retirees watched their hard-earned money slip through their fingers. Imagine the frantic worry as they thought about their retirement savings. Would they have enough savings? Would they have to go back to work part-time? Would they have to delay their retirement?

 

In fact, the Huffington Post claims that back in 2008, a poll concluded that 63 percent of Americans were worried about not having enough for retirement. For older Americans, the fear was probably even more intense!

 

So What If It Happens Again?

I’m not saying it will, at least, not with the same severity. But business cycles are consistent. The stock market will fluctuate. It can only go up for so long before it takes a turn for the worse.

 

And where will that leave you? In the U.S. News and World Report article “How Did Your 401(k) Really Stack Up in 2008,” the author points out that during the financial crisis stocks fell 38% while bonds dropped only 8%. This just goes to show that more conservative strategies (like bonds) do better in a recession. You can’t avoid loss during stock market crashes, but you can lessen the impact by adjusting your risk!

 

 The Moral of the Story: Assess (and Reassess) Your Risk

Over the last couple of months, we’ve had half a dozen or so retirees come in with sky scraping risk scores. On a scale from 1-100 with 100 being the most aggressive, their scores were anywhere from 75-90. This is astounding! Why would they be so risky so late in life?

 

There are a number of reasons, but I think the most common one is that they simply don’t know. One of those previously mentioned clients told us that her portfolio was very conservative, and it turned out being a 76! Imagine if her stocks suddenly plummeted. With risk like that, it wouldn’t be surprising to lose 25-35%.

 

We don’t want this to be you! We want you to plan ahead, to become an expert on your investment strategy as you approach retirement. Because—although we want you to live like a 25-year old—we don’t want you to invest like one.

 

Want to perform a risk analysis? Contact Seniormark at 937-492-8800 to set up a free consultation.

 

Not Tech-Savvy? Here’s How to Sign Up For Medicare

Not Tech-Savvy? Here’s How to Sign Up For Medicare

 

You might feel comfortable surfing the net, but that doesn’t mean you are ready to brave the more serious aspects of the online world, like online banking or enrollment in Medicare.

 

As soon as a website starts asking for personal information like your social security number or place of residence, I can understand your hesitation. You want to talk to real people with real faces, not interfaces or cold, algorithm-driven databases. If this is you, you are at the right place. Here are a couple ways to sign up for Medicare… the old fashioned way!

 

Call the Regional Social Security Office at 1-800-772-1213

 

At one time, this was the tech-savvy option, but not anymore. Nowadays, in the world of texting and email, it is almost nostalgic to hear another person’s voice across the line. Of course, you won’t hear the local operator anymore; in fact, the person who picks up won’t even be local. They will be from the regional Social Security Office, which is in Chicago (if you are from Ohio). Just tell them you need help signing up for Medicare, and they should guide you through the process from there.

 

Visit Your Local Social Security Office

If you would still feel more comfortable sitting down with someone face to face, this option is the way to go for you. However, it’s quite time consuming. If you call and schedule an appointment, there could be a 1-2 month wait before you get in! And if you walk in without an appointment, don’t be surprised if you have to take a number and hang out in the waiting room for a while, 30 minutes or maybe more.

 

Of course, these two choices are not nearly as fast as signing up online, nor are they the most convenient. But there is something to be said about that personal interaction of a call or a face-to-face meeting. It provides an element of trust that is hard to find on the web.

 

If you run into any problems, questions, or concerns while signing up for Medicare, give Seniormark a call at 937-492-8800 or just walk right into our Sidney office right next to Culvers. We can guarantee you won’t have to take a number and wait!

 

Will You Outlive Your Nest Egg in Retirement?

Will You Outlive Your Nest Egg in Retirement?

If this question is on the forefront of your mind as you approach retirement, you are not alone. According to recent studies, this is the primary concern of soon-to-be retirees just like you:

  • 43% of workers fifty or older say that outliving their money is their most significant retirement-related fear.
  • 57% of financial planners state that running out of money is their clients’ most pressing retirement concern.
  • 60% of older Americans fear outliving their savings more than death itself.

 

Truly, these figures speak to sleepless nights and anxiety of many older Americans, especially considering that many are less afraid of the grim reaper than an empty pocketbook.

 

But before you jump on the bandwagon of restless worry, I think it is important to step back and consider whether your fears are founded at all. Although there is definitely reason to believe that many Americans are financially unprepared for retirement, this doesn’t mean that you are. In fact, most of the clients I work with at my offices in Sidney and Troy have saved enough for a modest or beyond modest standard of living in retirement.

 

So, how do you find out? I have two words for you: income planning. In order to help ensure that you have enough money to last your entire life expectancy, you must analyze your situation and put an adaptable plan in place.

 

Although income planning is often a confusing and overwhelming process in all of the details, at its core, it is really only a few simple steps. Here is a rough sketch of what the income planning process looks like to get you thinking in the right direction:

 

  1. Check Your Income Sources

Almost everyone has steady sources of income that form the foundation of any good income plan. Start by figuring your Social Security benefit, and then add in your pension or income from rental properties (if you are lucky enough to have either of these). The key here is to add up any and all sources of reliable cash flow, perhaps even cash flow from part-time work in retirement (yes, I realize that seems crazy, but many retirees are choosing to work).

 

  1. Analyze Your Other Savings and Retirement Accounts

This includes investments and savings accounts as well as any qualified retirement account such as an IRA or 401(k). The idea is to calculate any lump sum amounts you will draw from to supplement your income sources. Once you’ve completed this step, you are ready to move on to the next (less enjoyable) step.

 

  1. Calculate Your Expenses

What I am talking about here is your basic expenses. This doesn’t include travel or big-ticket purchases such as boats or snowbird homes. This is about monthly necessities like food, water, shelter, car payments, mortgage payments, and the like. Start with what your bills are now, and then compare that to retirement. Will you have a car payment well into your retirement, or will you pay that off soon? What about your mortgage? How will your healthcare expenses change? For almost all retiring 65 and over, this means considering how much Medicare will cost them (read this blog to see) as opposed to their private insurance or employer plan.

 

  1. Run The Calculation

This step involves plugging all of those numbers into a system, either a homemade excel spreadsheet or an online program. This will help you figure out the chances of you making it your entire life expectancy without running out of money. With our clients, we use Money Guide Pro. This system runs a thousand different scenarios, calculating probabilities on various unknowns. It enables us to consider a wide variety of factors such as inflation, taxes, or potential dips or spikes in your investment portfolio that are difficult to calculate by hand.

 

  1. Add in Fun Extras

This is where it can get fun. If your chances of success are very high, you can add other “extra” expenses into your plan. Perhaps you want to go on a $5,000 trip every year to an exotic location. Perhaps you want to give back to your community so much every month. Whatever your dreams and goals are, you can add these in and rerun the calculation. You can continue to do this as long as your chances of success remain in a comfortable range!

 

Want Someone to Crunch The Numbers for You?

At Seniormark, we realize that income planning is easier said than done. But however difficult it may be, it simply must be done in order to answer the question weighing on so many minds: Will I outlive my nest egg in retirement?

 

Give Seniormark a Call for a free consultation at 937-492-8800 and put your fears to rest!