Planning for Your Retirement

April 2021 Newsletter | By: Ian Sachs, CFP®
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You work hard to make a comfortable life for yourself and want to continue your lifestyle during retirement. Contrary to popular belief, you will need to replace 70-90% of your pre-retirement income just to maintain the same lifestyle in retirement. While it is critical to adequately save for retirement, it is equally important to build a diversified portfolio to avoid outliving your assets.

Addressing all of the challenges that you might face in retirement is critical. With traditional pension plans becoming obsolete and the cost of healthcare benefits rising, you should establish several sources of income that will sufficiently cover your needs. On top of everything, the average couple retiring at 65-years-old will require $295,000 in today’s dollars for future medical expenses.

Let’s look at some of the financial challenges that we are currently facing with retirement:

  • Longer Lifespans – Our overall health is better than ever, and we are living longer than previous generations. Most individuals need to have enough funds in retirement to last longer than initially expected. For married couples, both age 65, there is a 63% chance that one spouse will live to age 90.
  • Inflation and Taxes – Inflation deteriorates your purchasing power over time, eroding what your current savings can buy. Retirement income needs to keep pace with rising costs, as well as potential future tax changes. A $2,000 monthly expense today will cost just over twice as much in 30 years, assuming inflation continues at about 2.6% annually.
  • Market Volatility – The market can be an effective tool to help keep pace with inflation. However, the timing of market downturns can negatively impact a portfolio right when it is needed most. The S&P 500® experiences a down market approximately three out of every 10 years.

Having a portion of your portfolio invested in assets tied to the market can help address shortfalls, inflation, and living longer in retirement. However, a well-rounded portfolio should also include a portion not directly tied to the market to help you diversify and offset market volatility.

There are some innovative and attractive investment alternatives for retirement that can provide:

  • An additional source of tax-free retirement income that is sustainable
  • A cushion against market volatility to help strengthen your portfolio
  • Creditor protected funds with a life insurance and LTC benefit

We specialize in structuring and implementing overfunded cash value life insurance policies by utilizing Indexed Universal Life insurance (IULs). Over the past 10 years, they have been among the fastest growing financial vehicles in popularity and with the pandemic, market volatility, and tax concerns on the horizon, interest and demand has only accelerated.

Contact Risk Resource to learn more about IULs and how they can help secure your future for retirement.

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