by Dave Kutcher
I think I’ve seen somewhere that the definition of insanity is doing the same thing over and over and expecting a different result. We bring this statement up only to spark the idea that, perhaps with changing economic times, we need to look at things a bit differently when considering our retirement years if we are to manage our way through what appears to be some inevitably strong headwinds.
When compared to prior generations, folks retiring now or approaching retirement are rightfully concerned with their financial security. The combination of increased life expectancy with the high cost of medical care alone compels one to re-look at how financial matters might need to be prioritized differently than the rules we have been following for years.
When you add significantly increased costs for basic living items (fixed expenses) such as groceries and fuel, the need to re-evaluate planning strategies increases too. Additionally, it appears according to most studies we see, more than ¼ of retirees remain obligated to mortgages and credit card debt well into retirement.
When considering options to improve your lot and provide some protection for yourself in the years ahead, you will have to ask yourself if you are willing to make changes in how you think about these “golden years”.
To make ends meet folks are making non-essential lifestyle choices that have less demand on their financial resources, seeking financial instruments that provide lifetime guarantees of income and, if necessary, drawing larger amounts from their current resources to make ends meet.
We have talked to you previously about planning guidelines utilized in the retirement planning space … one being the 4% rule and the other being the 75% rule. The 4% rule basically purporting that your money has about a 95% probability of lasting as long as you do with a life expectancy in the mid to late nineties if you plan to limit your annual withdrawals to 4% of your retirement funds.
The 75% rule simply says you will need about 75% of your PRE-retirement income during retirement to maintain same lifestyle as during your working years.
Taking a good hard look at these guidelines and making needed adjustments should also include very important considerations today such as the cost of long-term care, final expenses and any legacy needs for the trailing generations behind you.
When taking the time now to better prepare, this is also a great time to be sure your beneficiary designations are up to date, you have a current Will and consider other basic estate planning documents in order to be sure your plans are going to follow through in the most efficient ways possible. It is a shame when we see folks take the initial steps of planning, but not follow through on other needed planning tools, resulting in a final estate disposition of less substance than could have otherwise been achieved.
Prioritizing financial obligations can be a difficult task. Working with someone versed in both the attractions and the obstacles you will find on the road ahead may prove to be a valuable experience.
My name is David A. Kutcher, a retired Marine Corp Captain. My business partner in the lower 48 is Richard C. Scott, CLU, LUTCF. For nearly 40 years we have been helping folks with their personal retirement decisions. You can catch us on the radio every Saturday morning, “Retirement in the Last Frontier”, 8:30-9:30 on AM 650, Keni Radio and on Tuesday mornings, KFQD News Talk Radio AM 750 and FM 103.7. Frontier Retirement, 10928 Eagle River Road; Eagle River, AK 99577, (907) 795-7452.
