Photo credit: <a href = "http://www.freedigitalphotos.net/images/view_photog.php?photogid=2664">Stuart Miles</a>

If your client is retired with a pension, he or she may not need to worry too much about investing. However, if they received a lump sum from selling a business, for example, they may have to come up with a strategy for living comfortably for the rest of their life off that lump sum. Inflation and uncertainty as to the number of years remaining in their life are the two big complications.

Here are eight tips your clients may want to consider as they plan their retirement and legacies.


Tip #1

Make Their Money Last a Lifetime. Their money has to last at least as long as they do. The Alliance for Aging tells us the average person is born with a set of genes that would allow them to live 85 years and maybe longer based how they take care of themselves. Your clients’ retirement plans must include longevity provisions.

Tip #2

Protect Their Money Against Market Losses. Do not go into the market unless they have two layers of protection and a safety net. Their retirement strategy should protect their money first, generate competitive returns second. They may not have enough time to make up lost money.

Tip #3

Stop Losing Money the Safe Way. Low-paying fixed investments like CDs actually lose money after inflation and taxation. Once again, they may not have enough time to make up lost money.

Tip #4

Stop Relying on Unpredictable Interest Rates for Their Retirement Income. If they need income from their investments and rely on traditional fixed interest rate investments, the Federal Reserve controls their income and the quality of their retirement. Their plan should provide for long-term dependable income streams regardless of market conditions.

Tip #5

Stop Paying Unnecessary Taxes. Their plan has to reduce and/or eliminate taxes on:

  • Social Security benefits
  • Unused interest, dividends and capital gains
  • Capital gains even when you lose money

Tip #6

Protect Their Assets From Nursing Home Confinement. Leverage their cash to protect their assets from nursing home confinement. The Wall Street Journal reported in June 2000 that for a couple turning 65, there is a 75 percent chance that one of them will need long-term care. AARP reported in May 2000 that the average annual nursing home cost was about $56,000. Use asset leverage and transfer this risk to a corporation that has the money to pay their way.

Tip #7

Maximize the Wealth They Transfer to Their Heirs. Their plan should have provisions to maximize the following assets for their heirs:

  • An IRA that is stretched can create a legacy.
  • Leverage can double or even triple the value of the CDs, stocks, bonds and mutual funds they have set aside for heirs.
  • Set up an exit strategy for their tax-deferred unused annuities.

Tip #8

Protect Their Assets Against Probate. Their plan must have provisions to avoid the three problems their heirs will face if they have to probate their estate:

  1. Cost. Look at the average cost of probate in their state.
  2. Time. The average time delays for probate are one-and-a-half to two years.
  3. Publicity. No wonder why we have an identity theft problem in our country: 100 percent of their probate records are open to the public.

For many of your clients, being an active investor with so much money means chasing the obvious investments, and therefore low expected returns. But is this how they want to spend their retirement? Staring at a computer screen and picking stocks? The question you may want to ask them is, “Of the money you have left, how much do you not want to risk so you can feel more confident investing the money you are willing to risk?” Then reposition the money they do not want to risk into a fixed product that will allow them to invest with more confidence, knowing their future is secure.

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