3 insights, 2 findings, 1 action (February 6, 2020)
How is it already February? I feel like January flew by, and what better way to start the new month than by sharing three insights, two findings, and one action.
3 INSIGHTS FROM ME
I. Value of making better decisions
Good decision-making is always beneficial for retirement planning as the stakes are so high. Your decision-making around six key strategies could provide up to a 38% increase in retirement income. Increased retirement income means increased retirement security and a better retirement experience.
Does your retirement planning include these six strategies?
II. Three keys to making great retirement planning decisions
Retirement planning often starts when someone seeks help with a specific decision, such as when to retire and how long funds will last. What people probably have not thought about is that all of these decisions are related, and they should not be made separately. Additionally, they probably haven’t thought about which decisions have the greatest impact. When evaluating retirement, a good decision-making framework is to consider the impact, relationship, and timing each decision has on retirement.
III. The value of good questions
There are no right answers until you ask the right questions.
You only get one opportunity for a successful retirement. Figuring out what that looks like is essential on many levels and begins with asking the right questions. A positive retirement experience largely depends on asking the right questions. Are you asking the right questions?
A few questions to consider...
What to do in retirement?
How much income is needed?
When is the best time to retire?
How to claim Social Security benefits?
How to convert assets into income?
What do I do when I need more help?
2 FINDINGS FROM OTHERS
II. New tool measures the income older persons need to live independently
The Gerontology Institute at the University of Massachusetts Boston recently announced the release of the 2019 Elder Index. This free tool allows users to find the true cost of living for older people in any U.S. county or state. The Elder Index measures the income needed to meet basic needs. It is specific to household size, location, housing tenure, and health status. The Elder Index is an excellent tool to help those approaching retirement assess the true costs, which is instrumental in revealing how much income is needed in retirement.
II. Which is better for retirement income: insurance or investments?
In large part, a positive retirement experience begins with having sufficient, stable retirement income to meet spending needs. There are two schools of thought for generating retirement income: probability-based and safety-first. These approaches diverge at where an individual is best served to place trust in generating income: on either the contractual guarantees of insurance products or the risk/reward trade-offs of investments. As is true with most things in life, there are trade-offs. The safety-first approach provides stable, lifetime income with zero market risk and manageability ease, but at the cost of limited growth potential and access to funds.
In contrast, the probability-based approach offers unlimited growth potential and ease of access to funds but at the expense of increased income instability, investment risk, manageability complexity, and sustainability concerns. The following article points out that neither approach is right nor wrong. And it’s important to approach how you decide to generate income with an open mindset that’s not an either/or proposition. In many instances, a more efficient set of outcomes can be obtained by combining the two approaches.
Which approach(s) are you using?
1 ACTION FOR YOU
I. One task you must complete to successfully transition into retirement
Well-established research indicates there are 15 developmental tasks you need to complete while still working to transition into retirement.
We’ll look at one of these tasks for our action item this week and reveal a new one each week.
The completion of these tasks does not suggest a person should retire. However, failing to complete the tasks will put a successful transition into retirement at risk.
This week’s task is associated with income and benefits: You must assess whether full-time retirement is financially feasible.
Why it’s important
An underfunded retirement leads to a more stressful and less enjoyable retirement experience.
This will inform the need to identify additional income streams and assets to make retirement financially feasible.
It will help answer two questions every individual needs to answer: when to retire and what that looks like.
It can provide an opportunity to evaluate continued employment prospects to supplement income.
It can clarify retirement goals and inspire greater focus on actions that advance progress toward goals.
Have a Question? Want to chat about it?
Until next week,
Mark Sharp, CFP® RICP® EA