• wealthspan author

The importance of having a plan in retirement

Updated: Apr 11, 2019

As a way to illustrate both the importance of planning and the recent emergence of new technologies to aid in that effort, we’re going to tell you two stories about couples that have taken entirely different approach to their later years. While these are true stories, we’ve changed their names and some details to protect their identity.


Ruthy and Bernie, both in their late 80s, with the financial resources, knowledge, and willpower to plan for their future, are living the dream life. They moved from a large home in Illinois to an independent living retirement community in Florida that allowed for transition into assisted living. Their personal lifestyle now is no different from the one they had in their detached house, except they’ve removed and condensed many of their housing costs -- relieving them of both the physical and financial burden of caring for a home. They have personal trainers, work out almost every day, and live full, active, and fulfilling lives near their extended family.


This represents the best of what health and retirement in old age can look like, and they’re fortunate to be sure, but they realize their luck will eventually run out. The aging of their bodies and minds will eventually catch up to them, and they know it, but they've planned for these events and are prepared, both mentally and financially.


Their plan -- which was initiated in their 50s and modified along the way -- has helped them to achieve the level of independence in their finances and lifestyle that they dreamed about when they began the planning process.


Sharon and Mark, both in their early 70s, are a highly educated retired couple living in an upper middle class neighborhood in the northwest suburbs of Chicago with above average financial resources. They feel comfortable in the amount of money in their retirement fund, and live independently in the same home they raised their children in for the last forty years. Life is good, and there is no need at the moment to worry about health or wealth. Or so they think.


The problem with Sharon and Mark is that they haven’t planned for their future. They were good savers and met with a financial professional who helped them invest their retirement money in some different financial products, but they never developed a plan, hoping the financial resources they accumulated would be enough to give them the lifestyle they desired. The problem is that the financial professional used the same method of investing their retirement dollars as has been used for most of the last two centuries.


What is the financial pro, and Sharon and Mark in particular, missing? They didn't develop a real plan that incorporated health, longevity and wealth considerations - they didn't merge aging science with the management of wealth for Sharon and Mark.


There are many things we need to think about and plan for when designing a plan for the future.

Longevity -- How long will I live? One of the great unknowns. The length of our lives is the great mystery that we all try to prepare for with our healthcare and our retirement savings. We guess at the amount of money we need to take care of our future expenses based on current expenses. How do we really know? We want to be able to answer this question with some real data - wealth planning with the benefit of age science.


Disability -- Would you rather have quality of life or a longer life? Both, right? However, it is well known that there is a high likelihood that you and/or your spouse will need long-term care at some point in your life. How are you going to address this? Should you self-insure, consider long-term care insurance and look at other options, like asset-based long-term care, to address a potential need. It's tricky to plan for a "potential"need, but how you prepare can play a critical role in whether your plan is successful or not.


Healthcare -- What can you do to improve your health and the healthcare that you receive? One way to try to protect against the need for long-term care and create a better quality of life is having access to the right doctors that have the best information. Sometimes easier said than done. However by having the best analysis tools, data, software, hardware and a trained professional at your fingertips, quality of life and care can increase more than ever expected. Combining telemedicine, concierge medicine and traditional medicine, increases in care quality and decreases in costs can be attained.


Income -- How much will you need and for how long? Where will the income come from and how will it potentially change over time with the loss of a spouse and the income he/she received. The sources and timing of the income you receive, and the taxes associated with the income, all play a role in this very critical planning element. So often we speak with people who have been great savers, but don't have a true distribution plan that addresses the many "what ifs" that surface throughout retirement.


Taxes -- You know you have to pay them, but are you paying more than you need to? Taxes will likely be the biggest expenditure you'll have throughout retirement. We work hard to lower your taxes so you keep more of what you receive. One of the biggest ways we can do this is through proper planning concerning how each of your accounts are invested. We want to help you find as many opportunities to receive tax preferred income or tax free income so you keep your tax bill as small as possible.

Investment Management -- should you do it yourself using low-cost index funds or should you hire a professional? If you hire a professional, should you pay a commission or operate under a fee for management agreement? What's the difference? Should you incorporate a passive management philosophy or look at something that offers risk management to try to avoid the big market moves lower when they come? We help you consider all of these, as they are all very important and will affect your performance, the fees you pay and the amount of volatility you should expect. We have created a Positive Wealthspan FUND to address some of the "How should I invest my retirement dollars?" question. We think it's a great addition to most financial plans, but you can see for yourself and get additional information HERE.


Estate Planning -- Some people want to leave a legacy after they're gone, by providing well for their heirs or giving generously to the charitable causes most close to them. Some people want to write the last check in their checkbook to spend their last dime on the day of their death. Most people end up somewhere in the middle, they spend a good portion of what they've saved to provide for the lifestyle they desire, but still have money left over at the end of their lives to do good or leave a legacy. No matter where you are on that spectrum, in order to accomplish what you want to accomplish while you live and after you're gone, it's best to have a plan and have that plan documented and funded (you might be surprised by the number of trusts that aren't properly funded or life insurance policies that have incorrect beneficiary information).


Financial Education -- we try to educate you and your spouse , if applicable, about your current health score and wealth score. We then show you how one affects the other positively or negatively. For example, we often speak with spouses who have very different health scores, with the female spouse possessing the hereditary makeup that would suggest she will live well into her 90's while her husband has a high likelihood of only living into his mid 70's. This is really critical information to know when building a plan that includes health and wealth.

Non-Financial Planning -- It has become very tabu to talk about financial matters with other people - even our family. This can't be the case when so much depends on planning for the true desires of our clients. They care about their money, but money is just a means to an end and we need to be crystal clear about what that end is AND include the people who need to know about what the desired end is. Most people don't just want to be remembered for the money they left behind, but they want to know they made a difference and has something of value besides money to pass along. We want to make sure this is addressed in the planning process and the non-financial legacy is intact and thriving.


Our Biggest Fears -- Two of our biggest fears in life: running out of money and a large, unexpected financial expense. With proper planning, we can help alleviate both of these fears.


Merging aging science with wealth management in the planning process can help remove the guess work and assumptions that most financial advisors have been using for years. When we plan to take a vacation, we call ahead and make a reservation, make our flight arrangements and map our our itinerary for the trip, with certainty. Why not do the same with your financial planning?


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