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“In the old days, you would plan for retirement and then when you got there, that was it,” says John Oliver.

“Now with increased life expectancy, there are a lot of opportunities for post-retirement planning,” says Oliver, who is vice president, advanced markets at Transamerica, Los Angeles.

The concept of post-retirement planning can mean a couple of different things, experts say. On the surface, some may feel this topic is of concern only to retirees. Continued planning throughout their retirement years can lead to an extension of the lifestyle retirees became accustomed to during their working years.

From another perspective, post-retirement planning can be viewed just as any other time period of one’s life, such as college planning, early career planning, family planning and retirement planning. Planning for the post-retirement years is something that should not be set aside until one retires, many experts agree, but rather should be considered as part of one’s life plan.

“People are starting to think about post-retirement planning a lot earlier than their retirement date,” says Dawn Fredette, second vice president, retirement and investment services at Travelers Life and Annuity, Hartford, Conn.

Planning for retirement has become a huge part of almost every American’s financial plan. Technical terms like 401(k) and IRA have become familiar additions to everyday language. Financial planners now cater to much more savvy investors, who are much better informed than ever before on tax laws and planning techniques.

“Today,” continues Fredette, “these people are very, very educated, and they are making educated decisions.”

Nonetheless, there is still a large segment of the population that is entering retirement who may not have given much thought to post-retirement financial planning. For these people, retirement is just the beginning of a new period of their lives.

“With the longer life expectancies, people that retire today are starting new businesses, and they’re inheriting large sums from their parents,” says Oliver.

Fredette agrees, saying that longer life expectancy means “most people will be in retirement for a long time.”

It is this extended lifetime that has retirees raising more questions. Many are asking: What’s next? What will happen with Social Security? How long can I reasonably expect to live? How will the new tax laws affect me? Will I need long-term care, and how much does it cost?

“One issue for retirees is how to maximize their income,” says Oliver. “With the longer life expectancy, people want to be sure they have enough income to survive on.”

Fredette concurs. “People insure their car, they insure their house, but what happens if they live too long? What if their assets run out?”

One solution, says Fredette, may be annuitization. “People haven’t focused on their longevity as a risk,” she continues, “and planners need to spend a lot of time educating these clients.”

Because of the “threat” of longevity, people need to be sure their assets don’t come up short, says Fredette. “Annuitization insures against that risk.”

For planners in the field today, “there is a huge opportunity for planning with these clients,” says Oliver.

With a constantly changing environment, people will need expert advice on issues such as: the new minimum distribution rules for qualified plans and IRAs, the recent estate tax reform legislation, and information regarding long-term care planning.

This segment of the population has large 401(k) and IRA accumulations, says Oliver. “This is the most wealth many of these people have ever seen.”

With such large account values, “people are concerned about preserving their assets, and accessing them,” says Fredette. She notes that people need to have a careful balance between risk and reward. “People need to consider that their portfolio has to keep pace with inflation,” she says.

In the fight to stay ahead of inflation, “some people will be aggressive,” says Fredette.

“But we also have clients that can’t sleep at night because of the volatility,” she continues. “These people will most likely turn towards an indexed-based investment or a more fixed income portfolio.”

Another concern for these retirees is the transferring of their assets to the next generation.

“With the new minimum distribution rules, there leaves a lot of money in the IRA,” says Oliver. “At Transamerica, we are training our agents the value of using the stretch IRA concept.”

Oliver adds, “We can show clients what a wealth generation tool the IRA is.”

When planning for the transfer of assets through the generations, Oliver continues, it is key to “strategically position life insurance for estate taxes and income taxes, then pass assets to kids and, ultimately, grandkids.”

Another area of concern for retirees is the threat of long-term illness. Statistically, with longer life expectancies comes a greater need for long-term elder care. The annual cost for such care currently averages $50,000. This expense has forced an evolution in financial planning. Now, “long-term care is a vital part of an overall financial plan,” says Harley Gordon, founding partner of the Corporation for Long Term Care Certification, Newton, Mass.

People over age 85 are the highest at risk for needing some form of long-term care. According to the Census Bureau, in 2020 this segment of the population will double to 7 million. With the costs for such care increasing, many retirees could see their entire nest egg go toward nursing home or assisted living facility expenses. The importance of long-term care insurance coverage is becoming one of the fastest-growing concerns for Americans today.

“Americans must be able to protect themselves against often devastating long-term care costs,” says Donald Young, in a statement released by the Health Insurance Association of America.

Young, who is interim president of the HIAA, continues, “Equally clearly, private long-term care insurance can play a crucial role by allowing Americans to plan for these future expenses.”

The financial services industry is answering many of these questions through continuous new product development efforts. Companies are targeting this market with innovative new annuities, riders for life insurance policies, and enhanced long-term care benefits.

“Companies that are going to be successful will have to package their plan as one big package available to the retiree,” says Fredette.

“But, not everyone has the same focus,” she says. “Some are focused on wealth transfer, others on long-term care–you need to have a lot of options.”

Working with retirees will open up other planning opportunities, says Oliver. Planning for retirees can also lead to continued planning for their children, he says.

“The planning process continues right through retirement,” he concludes.


Reproduced from National Underwriter Life & Health/Financial Services Edition, August 13, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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