Even in retirement, your portfolio may need to be positioned for both growth and security: growth to meet the challenges of a long life and the impact of long-term inflation and health care, and sources of secure income to ensure that your daily essential living expenses will be met.
This is a good time to think about your priorities and align your assets to support your personal goals (not just your financial aspirations). In fact, you may need to reposition your assets to accommodate a longer life with fewer assets than you previously thought.
When we talk about reevaluating and establishing financial goals, it shouldn’t just be about seeking a 10% average annual return on your investments over the next five years. You should consider what you actually want to do with your money. What is the purpose of it–to live out your life comfortably and secure, or to live in luxury, entertain, and travel extensively? The latter lifestyle may no longer be your priority, so before you determine what changes to make in your finances, it’s important to establish what you want from your life.
During this continuing era of slow economic recovery, remember that one of the key components to managing wealth is managing risk. In addition to the traditional sources of retirement and estate planning, consider today’s popular insurance options, such as annuities, long-term care, and life insurance policies.
Just because we are living longer doesn’t mean we’re going to remain healthy throughout our longer lives. In the past, seniors who lived long lives tended to be healthier in their senior years, which meant they had lower medical bills. But while some credit goes to more active, health-conscious, smoke-free lifestyles, it’s safe to say that today’s seniors owe more to prescription drugs and medical advances for lengthening their lifespan.
And as we all know, quality health care costs money–lots of it. In fact,
Fidelity Investments found in its 2011 Retiree Health Care Costs Estimate Study that a 65-year-old couple retiring this year with Medicare coverage will still need $230,000 to pay for medical expenses throughout retirement, excluding nursing-home care.
Speaking of which, with a longer life comes the greater likelihood of needing assisted living or long-term care. According to the Genworth 2011 Cost of Care Survey, assisted living averages $39,000 a year, and nursing homes average more than $70,000 a year – per person. For a couple, this kind of care could cost far more than their annual household income during their highest earning years.
Some of the things you can do to plan for a long life come down to repositioning your assets–as well as your approach toward life. For example, lifestyle factors can contribute significantly to both how long you live and the quality of life you lead. Areas where most of us could easily pay more attention include lower caloric intake, higher vegetable and fruit consumption, a higher fiber diet, lower body fat, and regular exercise.
Studies have also found that people who feel the most socially connected are four times less likely to develop serious illnesses. A Brigham Young University study reports that social connections–friends, family, neighbors, or colleagues–improve our odds of survival by 50%. In fact, the study asserts that low social interaction is the equivalent to smoking 15 cigarettes a day or being an alcoholic (Source: Social Relationships and Mortality Risk, July 2010).
Life is long, and it gets longer with each generation. They say that life gets in the way of even the best-laid plans, and it’s true. Every plan–even a financial plan–requires tweaking and adjusting periodically to account for current events. However, your personal goals may well remain the same for the rest of your life. So if you establish the purpose of your money–what it is that you want out of life–then you can reposition your assets to help you reach those goals.
The bottom line is whether you are still working or already retired, you need a sound financial plan in place to cover your retirement income needs.
Reesa Manning is a Senior Financial Advisor at Integrated Wealth Management, providing expertise in planning, investing, and managing your assets for income distribution throughout retirement. For more information, call Reesa at (760) 834-7200, or [email protected]