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Mandating Retirement Readiness Checkups

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What You Need to Know

  • People who are retired will probably have something they want to do.
  • If they want to retire by starting a bait shop, they need to fund that.
  • If they may have debt when they retire, they need to think about that.

American retirement outcomes need improvement. Having $100,000 saved in a 401k is not going to cut it. As we read daily, for the majority of people household retirement savings and projected incomes are at levels that will not sustain basic lifestyles when full-time work ends.

We are headed for a crisis for the many households who plan to primarily rely on Social Security benefits for the bulk of their non-working years’ incomes. As this situation unfolds, it will put substantial pressure on government to increase benefits for these households. This will add another initiative to increase stress on the federal budget.

At the same time, the medical community suggests that individuals get routine screenings for many diseases at certain ages. The goal of these screenings is to identify medical problems early, avoid costly medical treatments and prevent unnecessary deaths. The same practice needs to be adopted for retirement readiness.

I propose that an initiative be implemented to promote regular retirement readiness checkups beginning at the latest age 45. In reality, I think as soon as individuals begin full-time work, planning for their later years should begin.

A Retirement Readiness Checkup Proposal

Here are some example areas that a retirement readiness checkup could cover:

Finding purpose. What will people look to do or what causes do they wish to embrace once “every day is a weekend”? Having people think about what retirement looks like for them as early as possible should help build awareness of the costs needed to fund the desired future lifestyle.

Lifestyle expenses. What level of spending should be planned, including needed support for dependents or special needs children or grandchildren?

Health care needs. With post age 65 medical costs estimated at roughly $300,000 for a twenty-year retirement for two people, how these costs will be funded using a combination of insurance, federal programs and personal savings needs to be planned.

Social Security. Determining what amount of benefits to expect when work ends.

Business needs. With more and more individuals developing entrepreneurial business initiatives how should these businesses be planned for as they age? What is the desired end game for the business?

Legal considerations. Are the necessary beneficiary designations, estate planning considerations and health related powers of attorney in place?

• Savings strategy. How should the household use available tax advantaged savings and insurance programs including 401k, IRAs, annuities, cash value life insurance and health savings accounts. What level of personal savings is needed to produce desired retirement income?

Investment options. Which investment options should be used to put personal and retirement plan savings to work?

Long-term care needs. How will the household plan to obtain some form of long-term care coverage that will likely be needed? Today most households are ignoring this need incorrectly assuming that the government will pay these costs.

Debt management. How much debt will they take into retirement? Will they still be servicing mortgage and student loan debt as they age?

I also believe the cost of getting a readiness checkup should be an allowable tax deduction. The more people get professional financial advice, plan and take related actions, better retirement outcomes should result.

Regular Checkups Could Find, and Correct, Problems

Retirement outcomes for Americans need to be improved. A future retirement crisis is building for a large percentage of Americans.

One action that could be taken to address the coming challenge is to increase the household awareness of their projected amount of income, living expenses and other expected lifestyle needs in retirement.

By mandating periodic retirement readiness checkups beginning at age 45, a checkup program should accomplish this goal and allow sufficient time for implementing corrective strategies to achieve desired retirement outcomes.

Harry N. Stout (credit: Stout)Harry N. Stout has been the president of Fidelity & Guaranty Life, deputy chief executive of Old Mutual Financial Network, and managing director of Insurance Insight Group. He is also the host of the “FinancialVerse Podcast” and the author of The FinancialVerse personal finance books and of Today’s Annuities — A Tool to Create Protected Lifetime Income.


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