3 new realities of retirement

3 new realities of retirement

Think about your parents’ retirement for a minute. Their lives most likely look a whole lot different than their parents’. Your grandfather probably stopped working the very day he turned 65. He and your grandmother might have hit the links or the beach while they collected pension checks that they supplemented with high-yielding investments.

But, today’s retirees are living longer, working longer, reinventing themselves and staying active — all while trying to figure out how to pay for this great new chapter in their lives. They usually can’t rely on pensions, high interest on savings or health care benefits from former employers.

Call it revolving retirement. The term, coined by Strategic Business Insights’ Consumer Financial Decisions group, describes retirees who re-enter the workforce in one way or another either to fulfill an emotional need or make ends meet. They may find they’re bored with retirement or want to start a new career. With all this change comes confusion and sometimes some misguided assumptions.

“Frankly, a lot of myths about retirement are floating around out there,” says Thomas Rowley, director of retirement business strategy at Invesco Consulting. To help set things straight, we asked top demographic and financial experts to help bust some of those myths and offer advice on how best to prepare for a fast-changing future.

$300,000

That’s how much a 65-year-old male will need to cover health care costs for the rest of his life.

Source: Employee Benefits Research Institute, 2012.

MYTH: Luckily, I won’t need to worry about health insurance. Medicare will kick in when I’m 65.

REALITY: Most experts agree Medicare will be around in its present form for some time to come. But, people often misunderstand the limitations of Medicare. It doesn’t cover everything, especially long-term care. Consider the fact that a 65-year-old male will need more than $300,000 to cover health care costs for the rest of his life, according to 2012 research from the Employee Benefit Research Institute.

You need a solid health care costs strategy in place to deal with several factors. For instance, have you purchased long-term care insurance, or do you think you have saved enough for those potential expenses? If your company offers a health savings account, is this a viable option for you that you could roll over into retirement? (Earnings on savings for eligible health care expenses grow tax-free.) Do you intend to retire before you will be eligible for Medicare (at age 65)? If so, how do you plan to pay for health insurance coverage? Ask your advisor about strategies that can help cover health care costs in retirement.

MYTH: My taxes will be lower in retirement.

REALITY: Conventional wisdom has long held that your tax bracket, along with your income, will decline in retirement. But, that may no longer be the case. Taxes may continue to rise as the government struggles with the ongoing debt crisis over the next 10 to 15 years, says Russell Price, Ameriprise Financial senior economist. How you withdraw your retirement savings and how much you plan to spend each year will also affect your taxes. You want to make sure you have a good mix of taxable, tax-deferred and tax-free investments.

MYTH: My traditional asset allocation will definitely give me enough income.

REALITY: With persistent low interest rates over the past several years, some retirees are finding their savings aren’t generating the income they had hoped for. Proper diversification among a wide range of asset classes is key. With the right mix, you may be in a better position to handle market volatility, generate more yield to boost income and protect your portfolio from downturns in any one specific asset class. Your advisor can help you choose the asset allocation and diversification strategy that’s right for you. (Please see the following piece on alternative investments.)

Talk to your advisor about the best strategies to help you save for a long and fulfilling retirement.

http://www.ameripriseadvisors.com/brian.x.white

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*Ameriprise helped pioneer the financial planning process more than 30 years ago. We have more financial planning clients and more CERTIFIED FINANCIAL PLANNER™ professionals than any other company in the U.S. based on data filed at adviserinfo.sec.gov and documented by the Certified Financial Planner Board of Standards, Inc. as of Dec. 31, 2012.

Thomas Rowley, Invesco Consulting and Strategic Business Insights are not affiliated with Ameriprise Financial.

Asset allocation and diversification do not assure a profit or protect against loss in declining markets.

Alternative investments involve substantial risks and are more volatile than traditional investments, making them more suitable for investors with an above average tolerance for risk.

Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial and its representatives do not provide tax advice. Consult with your attorney or tax advisor regarding specific tax issues.

Brokerage, investment and financial advisory services are made available through Ameriprise Financial Services, Inc. Member FINRA and SIPC.

© 2013 Ameriprise Financial, Inc. All rights reserved. P1 – 8/13

Authored by: Brian White

Brian White is a Financial Advisor and an Associate Vice President at Ameriprise Financial located in Melville. Brian has over seven years experience in the financial services industry and runs a successful financial planning practice.  Over his career as a Financial Advisor, Brian has achieved notable accomplishments that rank him among the top of his peers such as The Mercury Award, The First Year Top Achiever and The Circle of Success.   Brian is a member of the Advanced Advisor Group and has earned the Chartered Retirement Planning Counselor designation. Brian works with clients to design a personal financial plan based on their life goals. This strategy focuses on helping them become more confident about managing their financial objectives. It is designed to provide solutions to both the everyday and long-term financial questions and is personalized to meet the needs of high net worth individuals and small business owners. Brian and his staff continually monitor progress toward financial goals and update plans based on changes in market conditions and individual situations. Brian attended Adelphi University from 2000-2004 and graduated Cum Laude with a Bachelors Degree in Business Finance. Contact:  631-574.2973 | Fax: 631.582.4243 | Mobile: 631.871.2560 | Brian.X.White@ampf.com Do you REALLY know what a comprehensive financial plan is?  Listen to Brian's 1/2 hour segment on TimetoPlay.com's Empower Half Hour The information contained in this material is being provided for general education purposes and with the understanding that it is not intended to be used or interpreted as specific legal, tax or investment advice. It does not address or account for your individual investor circumstances. Investment decisions should always be made based on your specific financial needs and objectives, goals, time horizon and risk tolerance. The information contained in this communication, including attachments, may be provided to support the marketing of a particular product or service. You cannot rely on this to avoid tax penalties that may be imposed under the Internal Revenue Code. Consult your tax advisor or attorney regarding tax issues specific to your circumstances. Neither Ameriprise Financial Services, Inc. nor any of its employees or representatives are authorized to give legal or tax advice. You are encouraged to seek the guidance of your own personal legal or tax counsel. Ameriprise Financial Services, Inc. Member FINRA and SIPC. The information in this document is provided by a third party and has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial Services, Inc. While the publisher has been diligent in attempting to provide accurate information, the accuracy of the information cannot be guaranteed. Laws and regulations change frequently, and are subject to differing legal interpretations. Accordingly, neither the publisher nor any of its licensees or their distributees shall be liable for any loss or damage caused, or alleged to have been caused, by the use or reliance upon this service.

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