Financial Planning for Individuals
The face of retirement in America has forever changed. At 76 million strong, the “baby-boom” generation represents the largest, wealthiest and most influential segment of the US population. We also enjoy greater health, a longer life expectancy and tend toward more active lifestyles in retirement than prior generations. Yet for all of our blessings, our generation is facing one of the greatest challenges in history – the possibility we may outlive our financial resources.  According to the Employee Benefit Research Institute:
- The number of employees covered by defined benefit pension plans has declined from 44% in the mid-1970s to less 17% today.
- The number of Medicare-eligible retirees with some form of employer-sponsored health care coverage has declined from 40% in 1993 to less than 20% now.
The movement by organizations from defined benefit pension plans to defined contribution plans, and the elimination of medical care coverage for retirees has shifted the responsibility for retirement security to YOU, the individual. Fortunately, many of you do possess the resources to meet your income needs throughout retirement, provided you are willing to plan intelligently and start taking action today. In 2006, Fidelity Investments published “America’s Lifetime Income Challenge” describing five key risks each of us needs to address when planning for our retirement:
- Longevity Risk – We’re living longer. As medical research and technology push the life span envelope, many of us will have to plan for the very real possibility we may live 25, 30, 40 or more years in retirement. Are you and your money ready?
- Inflation – It’s the norm, not the exception, and over time will increase the cost of goods and services we need while eroding the value of the funds we’ve set aside to meet those costs. What impact will inflation have on your investments and income sources?
- Asset Allocation Risk – Being too aggressive or too conservative in making investment decisions combined with low market returns increases the odds we’ll run out of money. How well does your current investment strategy manage downside risk?
- Withdrawal Risk - Over estimating how much money can be safely withdrawn from a given pool of investments can prematurely deplete essential funds needed for a long and active retirement. Is your withdrawal rate sustainable for 25, 30 or more years?
- Health Care Risk - Inadequate health care coverage for medical costs not covered by Medicare, or unexpected nursing home or rehabilitation expenses can further drain needed resources. Have you looked into your options for Medicare supplemental, long-term care or chronic illness insurance coverage?
A second study published in 2008 by Ernst and Young, “Retirement Vulnerability of New Retirees” concluded that nearly 3 out of 5 middle class new or near retirees can expect to outlive their financial assets, or to avoid outliving assets may have to reduce their standard of living by up to 24% without careful planning!  We can help you develop a blueprint of the steps you can begin taking now to help mitigate the impact of these risks and secure your financial independence. And having a plan is particularly apropos in times of economic and regulatory uncertainty.
Let’s assume you were going to build the home of your dreams. Would you just run over to Home Depot, buy a load of materials, and start throwing up walls or hanging a roof? Of course you wouldn’t. After all, building the home of your dreams represents a significant investment of your time and resources. It’s much more likely you would work closely with a qualified architect or home builder to take your vision and carefully craft it into a reality – starting with a comprehensive set of plans. Why would you be any less diligent about maintaining your financial independence? If you would like to schedule a complimentary appointment to discuss financial planning, ask us a question or learn more about our process, please select the corresponding link below. Request Appointment ⇒ Ask a Question ⇒ Continue to Our Process ⇒
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