Finding a Financially Comfortable Retirement


by Dana Bookbinder, Esq.~We all seek a financially comfortable retirement, yet there is a confusing array of choices of investments, advisors, and plans. I recently sat down with retirement planner Robert Berglund of Berglund Financial to discuss a simple guide to reach our retirement goals.

Bob, a former U.S. Marine who has over twenty years of experience in helping individuals plan for a comfortable retirement, has witnessed financial mistakes that are common and costly. The first common mistake is underestimating life expectancy. Financial plans for seniors today should assume that at least one spouse will live to age 90 or beyond. Twenty years ago, life expectancy was around age 76; it is now in the 80’s, which creates an additional ten years not provided for. Statistically, for a married couple with one spouse at least 65 years, there is a 50% chance that one will live to at least 90.

The second common mistake according to Bob is to fail to adequately factor in inflation when estimating future health care costs. The failure to do that can be disastrous if long-term care is needed. With current long-term care costs often surpassing $11,000 per month, and assisted living facility costs at approximately $6,000 per month, Bob points out that individuals often “misunderstand who is going to pay for their long-term care.” Medicare may pay up to the first 20 days of care and a portion of the next month or two, but generally there are no further benefits for long-term care from Medicare (excluding disability).

Bob cited a statistic that around 53% of American workers have saved less than $25,000 for their retirement. Since Social Security is clearly inadequate to cover long term care and fully fund a retirement, asks, “If you don’t provide for your long-term care needs in the future, who is going to provide for it? Is it going to be the government or is it going to be your family?” Half of the bankruptcies in the U.S. are estimated to be caused by health failures and the accompanying cost.

The third common mistake, according to Bob, is that many individuals stop investing (or generating interest income) when they retire, and if they are on a fixed income they become a victim of inflation and taxes. Instead, they must find appropriate financial vehicles that guarantee safety of their principal while providing lifetime income and easing tax liabilities.

Seniors are well advised to seek advice from a qualified and licensed professional who specializes in retirement planning. Other advisors may have different areas of expertise such as taxes, mutual funds, insurance and annuities.

Retirement planning requires individuals to maximize their pension and Social Security income but few corporations offer pension benefits. The burden of retirement has been shifted from corporate America to the individual. Few companies are matching employee contributions anymore. “Your retirement dollars start with you. That’s why maximizing pension and Social Security is an absolute must … we don’t know what the future holds,” Bob said. The timing of one’s retirement can make a tremendous cash flow difference to long-term retirement. Individuals can retire at 62 and draw Social Security benefits or they can go to full retirement at age 66, 67 or even 70. Individuals should also be aware that while it is possible to begin taking Social Security at age 62 and still work, the amount received will be much less and certain tax rules must be applied.

Another critical aspect of retirement planning is to minimize financial risk. While 2001 witnessed a 30-40% dip in the market, 2008 experienced one of the most severe crashes in the market since The Great Depression. This still impacts some Baby Boomers (born 1946-1964) and seniors. Even though the market eventually regained its losses, it took a few years to recover and many people who lost assets did not fully participate in the recovery.

The path to a comfortable retirement begins with estimating retirement spending needs. The retirement planner will evaluate an individual’s retirement income and create a cash flow plan. Bob points out that some income sources, such as the stock market, can be risky. Therefore, a portion of an individual’s retirement assets must be put in a safe place. One such place is an annuity. An annuity is a contract between the individual and the insurance company to pay a certain amount of interest over a certain time period. There are many different kinds of annuities that maintain principal and earn interest with minimal risk, have guarantees and allow access to your money.

The plan to retirement also necessitates protecting one’s nest egg with specific types of insurance. Life insurance can make the difference between a comfortable retirement and years of heartache. With proper insurance planning, the interest is not only tax deferred but the entire death benefit may be income tax free (but not estate tax free) to the beneficiaries. Insurance can play many roles in estate planning. Long-term care insurance can make a dramatic difference in peoples’ retirement. If an individual waits to purchase long-term care insurance until he needs it, however, he may not be able to qualify. The ideal time to purchase long-term care insurance is prior to age 50 or 55. It can be extremely useful for someone who needs in-home care after undergoing rehabilitation.

Finally, for a comfortable retirement, seniors and Baby Boomers should make sure that their estate plans are in order with a Will, Advance Health Care Directive and Power of Attorney. Be sure to work with a retirement financial advisor and an attorney knowledgeable in senior matters. The best kind of advisor will answer your questions and the questions that you did not think to ask as well as point out both opportunities and risks. With sound experience and a conservative plan, you and your family can get the most out of your assets.



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About Dana Bookbinder

DANA E. BOOKBINDER, ESQ. is the Founder of Bookbinder Law, LLC and has been advising families throughout South Jersey for nearly two decades on legal issues concerning asset protection for long term care expenses, public benefits eligibility rules, disability planning, and estate planning. Ms. Bookbinder has been certified as an Elder Law Attorney by the ABA accredited National Elder Law Foundation.

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