Mac’s Blog

 Next year about 10,000 baby boomers will hit retirement age and Medicare per day.  Prior to anyone planning to retire there are many thing that should be considered and aspects of the future that must be known if there is any hope of having a successful retirement.  Following are a few I think warrants consideration:

1. Do you have a complete, written Estate Plan?  An estate plan is not just to pass on your estate tax efficiently.  A proper Estate Plan provides care for your property (assets) during your life time and cares for your person as well.  Then the Estate Plan provides the guidance to effectively pass on your assets to your heir’s tax efficiently.
2. Do you have a written Retirement Plan?  You are going to live a long time and your money must last through Health and Sickness.  If you are married you must make sure your retirement plan provides the asset development and protection for your spouse you desire.  The Retirement Plan must work with in the Estate Plan to effectively meet your goals and objectives.
3. You may live to be 100 or at least you have to plan to live to 100.  Current median age is 84 but statistics say that if in good health at 65, the average male will live to 85 and female to 87.  This of course is average and a high percentage will live into their 90’s and beyond.  The fastest growing sector of the population is those over 100.  You should plan on living as many years retired as you spent working or more. 
4. You have to know how much money you will need in retirement.  With inflation as low as 2.5 the cost of living would double in 29 years and 4.1%, the average for the last 50 years, cost doubles in 17.5 years.  Even at 3.4%, inflation over the last 5 years, cost of living takes a hit that may not be affordable if not planned for. Successful planning happens when you start by keeping the end in mind. 
5. You must know and have a source of income to meet your basic needs regardless of the economy.  Only then can you plan an investment package to meet inflation. 
6. At best you may withdraw only about 3.5 to 4% per year of your portfolio annually if you want your money to last and this is only if the economy remains stable.  By having a guaranteed source of income to start with to meet basic needs makes this planning somewhat easier.
7. The new form of annuities and guaranteed income riders may be the best protection for meeting your basic requirements.  But to beat inflation you will have to invest in equities or the equivalent of equities, such as indexed annuities which provide significant investment protection, precious metals, bonds or other investments that may keep pace with inflation.
8. What is your investment risk tolerance and what is the level of risk your portfolio is in?  I am constantly shocked when potential clients want to discuss their retirement picture without knowing or understanding the level of risk of their investments.  History shows equity investments will recover over time.  The question is what is the time factor and at what point in you retirement plan did you hit the low or loss point.  Understanding that equities will correct in the future does not pay current bills.
9. Certain kinds of protection have always been essential to personal and financial well being.  Retirement planning will require exposure to some risk, if you are prepared for problems you sleep better at night and live longer.
10. All effective planning is written and your planning will be more accurate and comprehensive if you work with an advisory team.  As with any team it is important to have quarterback capable of providing structure and direction.  No advisor can do it all or know it all.  Having one advisor able to provide direction and concepts outside his immediate area of competence is crucial to any effective plan.
11. Your planning team is based on need reference your financial situation.  Most generally it should include an Accountant, Attorney and Financial, Retirement or Estate Planner with the Financial, Retirement or Estate Planner providing general guidance.   Your Account or Attorney may be able to provide the general guidance, but taking this route may wind up short changing you in the long run.  Your Accountant and Attorney will always work for a fee but your planner may or may not.  As with your investment broker, most planners derive their income from products they provide.  If the Planner, Accountant, Attorney or other member are more concerned about you than there fees or commissions they will make or save you more than their cost.

 Hubert McMinn is a Retirement Specialist with experience of 29 years residing in the Houston area of the State of Texas, USA.  For additional information, questions or comment he may be reached by email at hmcminn@plannedassets.com  or visit  www.plannedassets.com.