How to Avoid Running Out of Money in Retirement

December 31st, 2020

Advice on how to help your money last a lifetime from Roberts Wealth Management

Life is full of things to worry about. A recent survey from Allianz showed that two-thirds of people are more afraid of running out of money in retirement than they are of actually dying.  That may seem surprising, but it can be a very real possibility – if you haven’t planned properly.

There are a variety of factors that are contributing to increased concern and increased risk of running out of money.  Longer lives, less proactive saving, higher costs, stagnant wages and fewer people with pension plans are some of the key reasons that more of us are at risk of outliving our assets.

A new study from the World Economic Forum found that most people are expected to outlive their retirement savings.

This is because the median amount baby boomers have saved for retirement is just $152,000, according to a report from the Transamerica Center for Retirement Studies. That may sound like a lot of money, but if you withdraw $30,000 per year, those savings will only last five years.

So, what’s the secret to not running out of money in retirement? It can be tough to calculate how much you’ll need, especially when nobody can predict exactly how many years you will spend in retirement. Luckily, there are a few things you can do right now to help ensure you have the best chance of making your money last the rest of your life.

Here are SEVEN suggestions to help prevent outliving your savings and put your mind at ease.

OPTIMIZE Social Security

Summer Roberts

Your first line of defense against running out of money could be Social Security. Social Security payments are guaranteed to continue for the rest of your life, no matter how long you live, and are adjusted for inflation each year. Plus, they don’t fluctuate with the financial markets. However, it’s a good idea to take steps to help optimize your payments by carefully deciding when to sign up for benefits.  “Every year that you delay taking Social Security after full retirement age, you get an 8 percent increase in the benefits that you take,” says Summer Roberts, CEO of Roberts Wealth Management. While you can claim them as early as age 62, doing so will result in a reduction in benefits of up to 30%. The only way to receive the full benefit amount you’re theoretically entitled to is to claim at your full retirement age (FRA). By waiting until after your FRA to claim (up until age 70), you’ll receive a boost in benefits of up to 32% on top of your full amount.

For example, if your benefit at the current full retirement age of 66 is $1,000 but you opt to claim at 62, it would be reduced to $750. If instead you wait until age 70, it would be $1,320. Yet less than 2 percent of men — and only 3 percent of women — wait that long to claim their benefit.  “We have found that crafting a Social Security Optimization report for our clients helps them narrow down the options for filing Social Security from the thousands of choices to only a few.  This could be a critical decision where most of our clients need our help,” states Roberts.

Ease Into Retirement

Don’t feel pressure to go from 100% to 0%.  You may be counting the days until you can quit your present job, but that doesn’t mean you can’t take on some part-time work you enjoy.  Keeping busy and productive could help your physical and mental health, while also helping you avoid running out of money in retirement.  Every dollar you earn is one less dollar you have to withdraw.  Remember, every day you delay withdrawing from a retirement account is one more day your dollars can keep growing.

Assume You’ll Live Longer Than You Think

Many people who are close to retirement today spent their childhood years during a time when life expectancy was significantly lower than it is now.  When the Social Security Program was first created, life expectancy was around 65.  Today, the average life expectancy is close to 80 and there’s certainly a significant possibility that you will live longer than average.  It’s important to not let the memory of what things were like back then distort the realities of today.  You need to plan for your assets and cash flow to last much longer than you think. It’s better to save up for too many years of retirement and leave the excess wealth to relatives than to prepare for too few years and end up depending completely on Social Security.

You also can’t forget about inflation. Prices have more than doubled in the last 30 years. Historically, U.S. consumers have seen price increases of about 3 percent a year. Using that figure as your guide, plan on having double the amount of money you have today to maintain the same standard of living in 20 years.

Build Up Your Emergency Fund

You need to assume that there could be some blow-ups around the house, on the car, and in the economy at least to the extent that you have some short-term resources which allow you to accommodate those inconveniences.  Your emergency fund shouldn’t be confined to only a checking or savings account. While you should absolutely have money in these accounts for emergencies, your portfolio should also include some segments of assets that can be tapped when the other sectors are suffering from a market hiccup. Failing to plan for an unforeseen emergency can potentially drain your accounts quickly. Planning for these events in advance is an essential step in helping you avoid running out of money in retirement.

Think About How You’ll Cover Healthcare Costs

Healthcare costs are one of the biggest (yet most unpredictable) expenses you’ll face in retirement, making them difficult to plan for. You may spend a little more than your standard premiums, or you could spend thousands of dollars per year on out-of-pocket expenses. Since you can’t predict exactly how much you’ll spend on healthcare, you can, and should, prepare the best you can for these costs.

Regardless of your health history, there are certain costs you will always be responsible for. Once you turn 65, you’ll be eligible for Medicare. With Medicare coverage, you will still be responsible for all premiums, deductibles, and coinsurance, as well as any other out-of-pocket expenses Medicare won’t cover.  Original Medicare (or Parts A and B) doesn’t cover most routine care, such as dental and vision care, nor does it cover prescription drugs – you’ll need Part D coverage for that. You can opt for a Medicare Advantage plan that offers greater coverage, though these plans are often more expensive than Original Medicare.

Long-term care is another expense Medicare won’t cover. This cost can be significant, too. According to the U.S. Department of Health  and Human Services, the average cost of a semi-private room in a nursing home is around $6,800 per month. Long-term care insurance can help cover some of these costs, but the key is to enroll early — if you wait until you’re in your 60s or later, insurance providers will either charge you sky-high rates or refuse coverage altogether.

Downsize as appropriate

Some people can’t wait to retire early and live a simple life far from the crowd. Choosing a low-cost place to live could help your money last longer. If you can live without a boat, car, big house and a string of expensive vacations, you can stretch out your retirement funds for a long time. Now remember, you don’t have to downsize all at once. You can downsize in stages as your finances, interests and abilities change over time.

Additionally, the home you’re living in probably provides a great deal of emotional comfort.  It may be where you raised the kids, where you’ve experienced wonderful memories, and where you’ve built a beautiful life.  Whether or not you’re considering downsizing at some point, you should keep in mind that your “home” is also an asset, and the equity in that asset may provide a secondary emergency fund. Now we don’t recommend that everyone should tap into their home to fund retirement, but, as you’ve probably gathered from the tone of this article, we’re big advocates of developing “plan B” options so you can weather all the storms life may throw at you and your home may be one of those contingency plans.

“When you get into retirement, if you really want to make sure that you don’t outlive your assets, you need to control your withdrawal rate,” says Summer Roberts. “Somewhere around a 4 to 5 percent withdrawal rate of your assets is probably the most you can do. If you can make sure your lifestyle stays at or below that number, you are setting yourself up for success.  Better yet, set up an income plan that doesn’t rely on withdrawals, but can provide you guaranteed lifetime income.”

Consider an Annuity

With financial insecurity on the rise, many Americans are looking for potential ways to have guaranteed lifetime income. Retirees could use an annuity to supplement Social Security, providing another source of long-term income.

An annuity is a form of insurance that helps to reduce risk and provides lifetime income during retirement and is backed by the financial strength and claims-paying of the issuing insurance carrier. Depending on the type of annuity you buy, the annuity might accrue interest. As they increase in value, most annuities offer tax-deferred growth while shielding the owner’s principal from swings in the market. In general, when you are ready to begin receiving income, your annuity is paid out over time in installments of your choice: annually, monthly, etc. Often, retirees choose to receive monthly payments for the rest of their lives.

Important to note, not all annuities are alike. When considering whether an annuity is right for you, be sure to ask your financial professional about the different types of annuities, including variable and fixed indexed annuities. It’s also a good idea to ask for details about terms and conditions that could apply to the annuity, as well as how and when you can access the money.

The downside of an annuity is that some annuities may have high fees and complicated mechanics. It’s very important not to invest all of your wealth in an annuity because you might need funds available to cope with emergencies. “It can be important to work with an independent financial advisor when looking into various investment vehicles.  An advisor who is independent can shop around for which annuity or vehicle suits your and your family’s needs best,” says Roberts.

Making sure your retirement is properly funded is more challenging than ever between risks like market volatility and concerns of economic uncertainty. On top of that, we’re also living longer than we used to.  However, retirement worries don’t have to keep you up at night. The right financial advisor can help you make sure you’re on track to have the savings you’ll need to avoid running out of money during retirement.

Planning for retirement is ultimately a challenging guessing game, as there’s no way to predict exactly how much you’ll need to last the rest of your life. For this reason, you should consider receiving objective financial advice from an independent, family-owned & operated comprehensive wealth management firm, like Roberts Wealth Management, to help guide you on the path toward your ideal retirement life. Everyone is capable of avoiding running out of money during retirement; getting there simply takes proper planning.

About Roberts Wealth Management

An independent, family-owned & operated comprehensive wealth management firm delivering personalized financial guidance. A better way to retirement.

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“The Roberts Wealth Way” We don’t measure ourselves against other advisors, firms or market benchmarks. Our success is defined by measuring ourselves with meeting our clients’ goals, each of which are unique.

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Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Roberts Wealth Management are not affiliated companies.  Investing involves risk, including the potential loss of principal. Any references to [protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Neither the firm nor its agents or representatives may give tax or legal advice.  Individuals should consult with a qualified professional for guidance before making any purchasing decisions. Hypothetical examples are provided for illustrative purposes only; it does not represent a real life scenario, and should not be construed as advice designed to meet the particular needs of an individuals’ situation. We are an independent financial services firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. Our firm is not affiliated with the U.S. government or the federal Medicare program. Annuities are intended for retirement or other long-term needs. Guarantees are backed by the financial strength of the issuing company. Annuities are not bank or FDIC insured. 00782038 12/20

THE Roberts Wealth Management Answer to your Retirement Plan

January 2nd, 2019

Roberts Wealth Management is well known and respected for providing clients with a personal, integrated retirement plan.

The Retirement Plan is based on three principles- Trust, Integrity, and Customer Service. Roberts Wealth Management has offices in the Houston- Bay Area, Houston- West Sugarland and the Mississippi Gulf Coast. The Houston Bay Area team is led by financial professional Summer Roberts-Hager. They have experienced tremendous growth in new clients the past few years and continue to provide the quality personal care they are known for.

“While the day-to-­-day business of a financial advisory firm may sound mundane, we can assure you, that’s not the case at RWM. We have a simple mission: To have a dramatic impact on the life of our clients. We are passionate about helping our clients grow and protect their life savings, and just as passionate about helping them improve their lives. When we go out of our way to help our clients, we have the opportunity to make a difference both in their life savings and in the quality of their lives. Helping to improve people’s lives is not a bad way to spend your time. Some companies have a mission statement that is just something they hang on the wall – it doesn’t have a lot to do with their day-­-to-­-day operations. That’s not the case here. We wear our mission like a suit of clothes, because living it every day is the only way we’re going to be successful,” stated Summer.

This client-centric firm focuses on existing clients and also welcomes new customers. Summer Roberts confidently stated, “The goal of Roberts Wealth Management is to help each client on an individualized basis. We look at each family’s wants and needs to find a financial plan that is right for them. There is no cookie-cutter plan at our firm.” Roberts Wealth Management believes first in helping to protect your assets and second is the opportunities to grow wealth. Their goal is to help protect your financial future.

Roberts Wealth Management’s model is simple. “It’s like building a house.” The first thing you do when building a home is to lay your foundation. Your foundation must be strong, sturdy & there when you need it. Your retirement plan is no different. Your “foundation” money should be the protected, safe money that you cannot afford lose. The next phase in building a home is to frame it or put up your walls. When a big storm or hurricane comes through, your foundation is secure, your walls can take a lot of beating & pressure although they may crack, crumble a little or even flood, but it takes quite the storm to just knock them down. This is how the investments in your portfolio “walls” should act, similar to low & moderate risk portfolios. Then, finally, you get to the top of your home, your roof. Your roof is typically the first thing damaged in a hurricane – similar to higher risk portfolios.
“The important thing is to make sure that your retirement ‘house’ is structured appropriately,” says Summer, “meaning that you must lay your foundation first. Then you can build your home on top of it.”

Roberts Wealth Management is very excited to see continued growth in its future. The economic indicators show that 2019 could be a positive upcoming year. However, political and government issues may come into play, somewhat but possibly at a minimum. Founder, Paul Roberts, states [1], “Consumer confidence determines some of the markets trends and it is affected by people’s emotions, we cannot predict that.” A solid retirement plan is important to help protect the income you have worked hard for and earned over many years. Roberts Wealth Management’s goal is to offer you a comprehensive, thoughtful retirement plan. “Your plan should provide retirement income and growth.” Roberts concurred.
For all of you retiring this year or in the future it’s never too early to begin a life savings plan. Roberts Wealth Management can be reached at 281-549-6515 or email at info@RobertsWealthTexas.com or online at RobertsWealthTexas.com

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Roberts Wealth Management are not affiliated companies. Investing involves risk, including the potential loss of principal.

Any references to protection benefits, or safety generally refer to fixed insurance products, never securities or investment products.  Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Neither the firm nor its agents or representatives may give tax or legal advice.

Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 697045

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“Give us a call at 281-549-6515 and reference the code BAM2019 to see if you qualify!”