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What If the Boomers Outlive Their Money?

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What You Need to Know

  • Baby boomers had retirement plans.
  • COVID-19 came along.
  • Many of those plans now look… old.

Even the best laid plans can go awry. COVID-19 forced many baby boomers to retire earlier than they had planned. Now, they’re scratching their heads and wondering how to make their money last to age 100.

In today’s post-pandemic world, many boomers and older seniors are facing a mix of challenges that threaten their financial future. The confluence of forced early retirement, rising inflation, proposed tax hikes and physical longevity are placing many retirement portfolios in jeopardy. Add to that equation the projection that the Social Security trust fund will run out of money in 2034 and therefore jeopardize full benefit payments.

Fortunately, most financial professionals have already begun addressing these disruptions by meeting with clients and making tweaks in an attempt to maximize their clients’ nest eggs.

As clients and their advisors sharpen their pencils and explore all possible options to optimize their retirement assets, some clients have chosen to sell unwanted life insurance policies and use the cash proceeds from the life settlement to enhance their retirement.

Now is the time for retirees and advisors to develop a solid game plan to address the potential threats that clients are facing in the post-pandemic era.

Greatest Fear

Year after year, surveys of older workers and retirees reveal similar results regarding their greatest fear. The nightmare of outliving one’s retirement savings is what keeps most up a night — irrespective of their age. According to the recent Transamerica 2021 Retirement Survey involving workers from Gen Z to baby boomers, 42% of respondents picked the fear of outliving their money as their biggest worry.

Financial and insurance professionals can help calm their clients’ anxiety with thoughtful guidance. Although re-entering the job market may not be possible for older workers, it’s important for seniors and their financial advisors to identify any hidden assets — such as an unwanted life insurance policy — and determine whether the proceeds from selling the policy in the secondary market can be repurposed to meet their goals. For example, in one of our recent transactions, the client’s CPA recommended a life settlement to do just that.

Forced Early Retirement

A recent Pew Research study found that in the third quarter of 2020, more than 28 million baby boomers reported being retired — 3 million more than in Q3 2019. According to Pew, the job losses associated with the COVID-19 recession may have contributed to the spike in boomer retirements.

Forced early retirement strikes a devastating blow to the retirement savings goals of older workers. In addition to locking in a reduction in the amount of their annual Social Security benefits, the loss of one’s employment can have a snowball effect on the senior’s future financial security. Loss of group health insurance, 401(k) matches and other worker-related benefits often cause boomers to begin draining their retirement investments far earlier than is typically safe to do so.

Inflation: 5.9% COLA for Social Security Beneficiaries

Seniors living on a fixed income are often the hardest hit when it comes to rising prices. In 2021, rising energy costs and supply chain issues caused by the pandemic resulted in huge price increases. From the price of gasoline to used cars, higher prices are taking its toll on retirees. Economists predict that until supply and demand even out, the impact will continue to be felt into 2022.

For many seniors, their first glimpse of the actual “rate” of inflation is when the Social Security Administration notifies them of their annual cost-of-living adjustment (COLA).

More on this topic

In 2022, 70 million beneficiaries will receive a 5.9% COLA — one of the largest increases in decades. While that may seem like a windfall, it’s not. A corresponding Medicare B and D rate increase (which are deducted from social security payments), could offset all, or a substantial part of, the upcoming cost of living adjustment.

Unfortunately, rising inflation remains one of the greatest threats to one’s retirement savings. This presents just another reason for advisors to “think outside the box” for solutions as their clients advance into their golden years and begin withdrawals from their savings.

Higher Taxes and Reduced Social Security Benefits?

While President Biden’s claims that the new programs in his Build Back Better plan will be paid for by corporations and high income earners, some opponents believe it will also hit those at the bottom with higher prices passed on by corporations, loss of jobs, lower wages and ultimately more taxes.

Adding more fuel to the fire, the Social Security Trust Fund is projected to run out of money one year sooner than projected — yet another by-product of the COVID 19 pandemic. According to government officials, by 2034, Social Security will not be able to pay full benefits. If no changes are made before the fund runs out, the most likely result will be a 25% reduction in the benefits that are paid out.

Physical Longevity

Depending upon one’s financial assets and personal convictions, longevity may be a blessing or a curse.

Major advances in medical treatment have increased the odds of living past age 110, according to a new study from the University of Washington. Although life expectancy took a dip recently due to a rise in drug overdoses, suicide rates and liver disease, it’s likely that more people will make it into their 80s, 90s, and beyond. According to the Schwab Center for Financial Research, a 65-year-old woman today has a 50% chance of living to 85 and a 25% chance of crossing into her 90s.

Most aging seniors would agree that quality of life is far more important than simply living longer. Having the financial resources for proper medical care and a comfortable lifestyle is paramount.

Key Takeaways

The post-pandemic era is presenting a new set of challenges for workers and retirees who fear outliving their savings. Fortunately, options are available and thinking outside the box is key to implementing them.

In addition to traditional planning methods, financial professionals have a variety of tools to help clients protect their nest eggs. Examples include using the cash proceeds from a life settlement to boost the balance of their clients’ retirement investments. Another option some advisors are recommending is to provide the client with a guaranteed income stream by investing a portion of the client’s retirement savings into a fixed income annuity. And finally, a combination of both strategies would involve using the cash proceeds from a life settlement to purchase a fixed annuity.

If you have questions regarding life settlements and the broker’s role in maximizing the payout that policy sellers receive when selling their policies, call life settlement professionals. There´s much to discuss.


Hallman, from FrithScott Thomas, from FrithJeff Hallman and Scott Thomas are co-founders and managing partners at Asset Life Settlements, a life settlement brokerage company based in Orlando, Florida. Hallman can be reached at (888) 335-4769, extension 1108, and Thomas can be reached at (888) 335-4769, extension 1115.