Retirement Emergency & How to Fix It

 

 

 

 

 

 

 

 

Retirement Emergency and How to Fix It

“Eighty-three percent of African Americans over the age of 50 lack the retirement assets they need to last the remainder of their lifetimes.” Center for Global Policy Solutions, August 2015[1]

 

“You can be young without money, but you can’t be old without it.” Tennessee Williams

 

Retirement insecurity for eighty-three percent of African Americans over the age of 50 to me can be described as a “Retirement Emergency”. The retirement dilemma in our country is rooted in the fact that today longer life expectancies mean you will likely spend more years in retirement than you did working.  Planning how you will fund those extra years takes on added importance. Today, the average 65-year old couple has a 52% chance that at least one spouse will reach the age of 95.[2]  While pensions were once a reliable source of retirement income, the burden of funding retirement has shifted overwhelmingly to the individual.[3] Regardless of whether one chooses to fund their retirement years through a 401(k), Roth IRA, Real Estate or with other investments, African Americans need to be aware of the Retirement Emergency we are in and how to fix it.

 

The Center for Global Policy Solutions concluded in their article “African American Retirement Insecurity” that Wealth inequality, Homeownership, Inheritances and Generational Support, Labor Market, Lower Retirement Savings Rates, Health Insurance and Social Security are the seven factors that lead to fewer economic resources in retirement for African Americans.[4] But as a Retirement Income planner, my goal is to assist every African American over the age of 50 in finding solutions to eradicate the 83% statistic and increase the membership into The 17% Club. Here is how you do it:

 

1. Income Plan – The first step in ensuring you will have the adequate income needed to meet all living expenses during retirement is you must have a Retirement Income Plan. A well-developed Retirement Income Plan provides step-by-step instructions on how your retirement plan will provide the sufficient, guaranteed, lifetime income to you in retirement regardless of how long you live. Every retiree needs an income plan that centers around how much income is needed and wanted in retirement. If you are concerned about your income plan, we can assist you in utilizing the proper financial tools to create paychecks for life, how to maximize your Social Security benefits, how to choose the right Pension options and much more.

 

2. Health Care Plan – The second step in ensuring you will have the adequate income needed to meet all living expenses during retirement is you must have a Health Care Plan. Paying for health care can be one of the largest expenses for people in retirement. A 65-year-old couple retiring in 2016 will need an estimated $260,0001 to cover health care costs in retirement, according to Fidelity’s Retiree Health Care Cost Estimate. The estimate applies to retirees with traditional Medicare insurance coverage and provides a general idea of the monthly expenses associated with Medicare premiums, Medicare co-payments and deductibles, and prescription drug out-of-pocket expenses.[5] While Medicare covers many health-related expenses in retirement, long-term care costs are only covered by Medicare in limited circumstances. Fidelity estimates that a 65-year-old couple would need $130,000, in addition to savings for retiree medical expenses, to insure against long-term care expenses. This assumes the couple is in a good health and purchases a policy with $8,000 monthly maximum benefit, with three years of benefits, and an inflation adjuster of 3 percent per year. If you are concerned about rising health care costs in retirement we can assist you in determining if your current plan is sufficient.

 

3. Inflation Plan – The third step in ensuring you will have the adequate income needed to meet all living expenses during retirement is you must have an Inflation Plan. Investopedia defines inflation as the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.[6] An inflation plan protects you from the number one fear that retirees have which is outliving their assets.  Because of the longevity statistics I referenced earlier, it is important that your retirement assets are structured properly to cover all expenses in retirement as the cost of living rises.  Rising costs in retirement include utilities, property taxes, income taxes, gasoline, groceries, medications, health care and clothing. If you are concerned about your investments outpacing inflation throughout retirement we can perform a portfolio stress test to uncover the hidden risks in your portfolio, a fee analysis to determine the true cost of your plan and a performance analysis to determine if your needed returns are possible in your plan.

 

4. Tax Plan – The fourth step in ensuring you will have the adequate income needed to meet all living expenses during retirement is you must have a Tax Plan. The three biggest enemies to your retirement success are Health Care Costs, Inflation and Taxes. The largest expense we all pay in our lifetime is taxes. It is imperative that everyone has a tax plan to combat the inevitable tide of rising taxation on our assets, specifically our retirement accounts. As I write this, our National Debt is over $21,219,012,000,000.00 (that is over $21 Trillion dollars) and growing by the second. Our debt can only be reduced by reducing our federal spending and increasing our federal TAX revenue. If you are concerned about rising taxes in the future, how to reduce your taxes and how to create a tax-free retirement plan we can assist you with proper tax planning in your retirement plan.

 

Although eighty-three percent of African Americans over the age of 50 lack the retirement assets they need to last the remainder of their lifetimes, I know we can change this statistic by applying the four steps listed above immediately to our current plan. Yes, we are in a Retirement Emergency, but I refuse to let this emergency linger any longer. Join me as we take action in ensuring that all African Americans over the age of 50 have the sufficient retirement assets needed to last the remainder of their lifetimes. Call our office today at 615-678-6603 (www.rollovercompany.com) for a free retirement income plan review to make sure you are in the seventeen percent club if not let us show you how to become a member.  Also share this blog with family members, friends, colleagues, church members and associates.

 

[1] Meschede, T., L. Sullivan, and T. Shapiro. (September 2011). The Crisis of Economic Insecurity for African-American and Latino Seniors. Demos and the Institute on Assets & Social Policy. Retrieved from http://www.demos.org/sites/default/files/publications/IASP%20Demos%20Senior%20of%20Color%20 Brief%20September%202011.pdf.

[2] Based on the Annuity 2012 Generational Mortality Table

[3] Income of the Aged Chartbook, 2010 Social Security Administration, Office of Research, Evaluation and Statistics (October 2010)

[4] Guzman, Elvis, and Vulimiri, Madhulika (August 2015). African American Retirement Insecurity. Retrieved from http://globalpolicysolutions.org/resources/african-american-retirement-insecurity/

[5] 1. Estimate based on a hypothetical couple retiring in 2016, 65-years-old, with average life expectancies of 85 for a male and 87 for a female. Estimates are calculated for “average” retirees but may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Original Medicare. The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care. Life expectancies based on research and analysis by Fidelity Investments Benefits Consulting group and data from the Society of Actuaries, 2014.

[6] Inflation https://www.investopedia.com/terms/i/inflation.asp#ixzz5LpTnSwXh