The average life expectancy is 78-and-a-half years, according to the National Center for Health Statistics. However, many people will live 20 to 25 years past retirement age. Therefore, the challenge for our clients is how to arrange their financial resources so that they have adequate income throughout those retirement years.
The median income of the retired population was is around $18,700 for those age 65 and older. In 2010, Social Security on average accounted for 40 percent of their income. Pensions and annuities accounted for 20 percent, income from assets accounted for 12 percent and income from earnings accounted for 27 percent.
According to the Social Security Administration, the average monthly benefit for retired workers was $1,230 per month at the beginning of 2012.
A survey by the Employee Benefit Research Institute (EBRI) revealed that the percentage of workers saying that they have saved for retirement decreased from 75 percent in 2009 to 65 percent in 2012. Forty-two percent of the respondents said they have tried to calculate how much money they need for retirement. Sixteen percent of workers were not at all confident of having enough money for retirement.
While retirement typically occurs when an individual turns 65 or 66, depending on when they were born, reaching that age does not necessarily signal a complete end to employment. Many retirees continue to participate in the workforce. They often do so for financial and nonfinancial reasons. Work for many is very much part of their human experience.
Our clients may want to evaluate their current financial resources to determine if they will have adequate income during retirement years. If projected retirement income is not adequate, income needs to be reallocated to save for retirement years. It is essential that our clients be educated regarding the necessity of planning to provide for their retirement years. Our clients need to know the importance of saving for the future and to begin as early in life as possible. As the economy and job changes occur our clients need to preserve their retirement accounts as they move from job to job
If you’re going to focus on the expanding senior market you will need to be able and willing to counsel your clients on quality of life issues that are defining this market. As highly trained professionals we have to move past how much money our clients have. We have to discuss with our clients aspects of:
Because retirement planning is a multi-dimensional undertaking for our clients we might begin on how to best distribute and preserve assets. Retirement planning does not end when our clients retire; in fact, retirement planning includes putting the plan in effect. We must follow our clients, helping them adjust and conform to the realities that occur throughout their retirement years. This includes but is not limited to:
- Providing products to both accumulate retirement assets and
- Distribute retirement income.
- Manage aging health-care needs.
- Recovering at home after a procedure.
- Options for long-term, convalescent and skilled-care needs.
To adequately address these ongoing needs you will have to be able to offer advice and solutions that include:
- Health-care products such as Medicare Supplement, Medicare Advantage
- Life insurance like final expense, single premium whole life and address old insurance policies written under old mortality tables and/or to address estate taxes
- Short term and long-term care products to ensure asset protection, choice of care and spousal survival health needs
- Financial products such as single premium immediate annuities to address income needs, deferred annuities to protect choices and to address changes in lifestyle issues that come with aging and indexed annuities to address laddering of future income needs and capital preservation
It is important that we understand the various laws and government requirements that will have an impact on our clients lives, that govern these varied products and ultimately the retirement needs of our clients to help them formulate strategies to meet those needs.
For more Lloyd Lofton, see:
- Long-term care as a component of financial planning
- When to retire: Social Security options
- 8 retirement planning tips