January 2018
I had an old boss that once told me “every presentation you make, you should be able to do on a bar napkin and if you can’t, you should stay in the bar until you can!” This advice is more important today than ever in that there is so much information available from so many different sources and sites and one does not know what is valuable, insightful, misleading, too confusing or just plain wrong! I just googled the word;
- RETIREMENT there are 132,000,000 sites to explore,
- RETIREMENT INCOME there are only 8,600,000
- SOCIAL SECURITY a whopping 443,000,000
Do you think my boss was onto something back in 1983? Having spent 43 years in the Securities Industry and the last 18 years totally focused on the BACK 9 / DISTRIBUTION PHASE I’ve come to the following conclusion.
There are only 4 pieces in the Retirement Income Puzzle;
1) Social Security & Pensions
Prior to the mid 1980’s most retirees income was exclusively made up of these 2 components. Lifetime income was the key and most critical factor. However with extended life expectancies and the liability that went with it, many corporations decided to get out of the Defined Benefit arena into the Defined Contribution one. They basically shift the responsibility for investing and drawing lifetime income from themselves to the individual!
That leaves Social Security as the primary source of Retirement Income for most American’s which is what I’ve focused on for the past 5 years (read archive articles Back9Pro.com). Of the 42 million retired workers the average check is $1,369/mo. Among elderly beneficiaries 50% of married couples and 71% of unmarried persons receive 50% or more of their income from Social Security! SSA Fact Sheet 2017
KEY REMEMBERANCE POINT! 42% of men claim benefits at 62 while only 2% of men wait until age 70. Whatever your check is at age 62 it will be double at age 70 assuming a 2% COLA. The cumulative difference in benefits can easily surpass several hundred thousand dollars over a joint lifetime! This is WHY it is imperative to understand all your options before filing for benefits!!!!!
2) Investments
Under the Investment piece I am including ALL Qualified and Non Qualified assets one accumulates over a lifetime. From 401k’s to IRA’s, Stocks & Bonds, Real Estate, Oil & Gas and every other thing that one might own. I call these IRONS or Clubs in the Bag the more assets you have the more opportunities for planning you have which is where you might require professional assistance from financial professionals.
KEY REMEMBERANCE POINT! As one ages into their 70’s, 80’s and beyond declining cognitive ability is a real issue for many American’s. That in conjunction with the death of either spouse might require the support and guidance of an Financial Advisor.
3) Work
Contrary to popular opinion WORK is not a 4 letter word! Over 50% of baby boomers hope to work in retirement to some extent and it is my personal opinion that Phased Retirement will be huge going forward. Not only does work give us the ability to bring in additional income, but it also lends itself to meaningful social interaction as well as a greater sense of purpose and direction. I have also found that people who continue working tend to live longer that those who retire to the couch.
KEY REMEMBERANCE POINT! For every $10,000 of additional income per year of earnings it would take approximately $250,000 of investment capital!
4) Home Equity
The final piece of the puzzle which is often overlooked in the retirement planning process is home equity. Household wealth in the United States accounts for 2/3 of total net worth (which includes the value all retirement plans). Integrating home equity into the retirement income conversation is essential, which is why I got licensed last year as Home Equity Retirement Specialist / NMLS # 1603374.
Using a HECM (Home Equity Conversion Mortgage / Reverse Mortgage) where appropriate one could payoff an existing mortgage (eliminate monthly mortgage payments), setup monthly checks for life, create an irrevocable LOC (line of credit) that can be used in down markets, emergencies or for the ability to create an income bridge while delaying Social Security. It can also be used for folks looking to downsize to a dream home without having to put all the money down into their new home (H4P).
FINAL TAKEAWAY
As we moved into 2018 and beyond I’d like to position my self as YOUR 62 RESOURCE as it relates to Social Security and Home Equity. Why 62? You have to be 62 to claim Social Security & both spouses have to be 62 to use a HECM. Never ever hesitate reaching out if you have any thoughts, questions or concerns. I can assure you that I will always do what is RIGHT for you and your clients.
Have a Great 2018!
