No matter where you are in your retirement journey, a financial advisor may be able to provide you with potentially valuable information and advice. A comprehensive retirement plan tailored specifically to your situation could have a major impact on your retirement: It may help you avoid common retirement pitfalls and mitigate risks. Here are 3 potential retirement challenges you can plan for.
Longevity
While a longer life is certainly a blessing, with it comes the risk of outliving your money. Considering the often expensive healthcare costs in old age, the staggering cost of long-term care and the fact that Americans continue to live longer, running out of savings in retirement is certainly a possibility. However, there are options for protecting against this. While Social Security can provide reliable lifetime income, it’s only designed to replace about 40% of your pre-retirement income,[1] and may replace less depending on your lifestyle. We can help you decide on the best retirement income option for you, whether you have a pension and are unsure of your payout strategy, or you’re wondering how to turn your retirement account savings into lifetime income.
Current and Future Taxes
A change in leadership in Washington and a growing national debt could potentially mean higher taxes in the future. Starting at age 72, IRAs, 401(k)s, 403(b), 457, and Thrift Savings plans are subject to Required Minimum Distributions (RMDs). The purpose is to draw down your account and tax the funds that have been growing tax-deferred for many years. RMDs are one reason why your tax burden could increase in retirement. There are many strategies available, including a Roth IRA conversion, in which you pay tax on contributions instead of distributions. Roth IRAs are also not subject to RMDs and can be used in addition to a traditional IRA or 401(k) to help minimize taxes.
Low Interest Rates
Low interest rates can be great for people buying a home or taking out student loans, but what about those nearing or in retirement? When lower-risk investments like CDs and bonds offer lower returns, it can make retirement planning more complicated. Interest rates are almost zero, and they could stay low for at least a few years.[2] While this may help an economy struggling with the COVID-19 pandemic, it may tell a more complicated story for retirees. An advisor can help you assess your investment options and create a plan aimed at getting you a reasonable rate of return.
An advisor can look at how these retirement challenges could affect you, and help you develop a plan that is tailored to meet your unique needs. We’re also here to help you adapt this plan in the case of financial and life changes, as well as policy changes. Our complimentary financial review is the first step to creating a comprehensive retirement plan and a strong relationship with an advisor that could last your lifetime – get in touch to sign up.
[1] https://www.ssa.gov/benefits/retirement/learn.html
[2] https://www.forbes.com/sites/sarahhansen/2020/08/31/fed-wont-raise-rates-until-2025-goldman-sachs-predicts
The commentary on this blog reflects the personal opinions, viewpoints and analyses of BML Wealth Management’s employees providing such comments, and should not be regarded as a description of advisory services provided by Cooper Financial Group. The views reflected in the commentary are subject to change at any time without notice. Nothing on this blog constitutes investment advice. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future returns.
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We do not provide tax or legal advice, all individuals are encouraged to seek guidance from qualified professionals regarding their personal situation. Any references to protection benefits or steady and reliable income streams in this guide refer only to fixed insurance products. They do not refer, in any way, to securities or investment advisory products. Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by insurance company. Annuities are not FDIC insured. Indices mentioned are unmanaged and cannot be invested into directly.
