The Changing Environment for Retirement Planning
For as long as anyone can remember, people have depended on three primary sources for their retirement income: pensions, personal savings, and Social Security. Over the past several decades, however, the picture has changed.
One significant change is that retirement funding for most people has gradually moved from an emphasis on employer-paid defined benefit pension plans to employee-funded defined contribution plans like 401(k)s.
Furthermore, as the burden of retirement savings has shifted, so has the investment risk. Individuals are now increasingly responsible for funding their own plans, making their own investment choices, and taking on the risk that those assets could decline in value during times of market volatility. The global economic downturn of 2008, the period following the 9/11 terrorist attacks, and the stock market crash of 1987 are examples of events that resulted in double-digit declines.
Other Factors Challenge Today’s Pre-Retirees
Other current socioeconomic and demographic factors have made it more important than ever to prepare financially for retirement. These include:
• Longer life spans and uncertainty surrounding the future cost of healthcare
As people grow older, their need for health care and long-term care services increases.
• Fluctuations of financial markets and the impact on retirement account balances
The shift from defined benefit plans to defined contribution plans does have the advantage of the potential for significant gains in investments. However, financial markets may be subject to periods of volatility.
Many parents entering retirement today are concerned that they will outlive their retirement savings, or not be able to leave a financial legacy for their children and grandchildren. As a result, they may try to limit their spending to what their retirement accounts earn each year, preserving the principal to help ensure that they will never run out of money. While this will help maintain their savings, this conservative income strategy may limit their ability to fully enjoy retirement.
Finally, retired couples also face another issue. The monthly income payments that they receive from Social Security, pensions and annuities may be reduced after the death of the primary recipient. This may occur at a time when a surviving spouse still needs this income to live on.
Planning Questions to Ask Yourself
Whether retirement is around the corner or decades away, planning for it should raise these questions:
• What would happen if you retired at a time when stock and bond prices are declining?
• What is the erosive impact of taking income from an equity-based retirement account in a bear market?
• How can you prepare to more effectively manage your income during retirement?
In today’s challenging environment, how can you take more control of your retirement planning and find the right strategy to help you face the future with confidence?
Your ideal supplemental retirement income strategy might offer these characteristics:
• A systematic and disciplined approach to setting aside funds;
• Stable and consistent growth in cash value; and
• Tax advantages and flexibility.
The Whole Life Retirement Solution
Whole life insurance offers a combination of death benefit protection, cash value accumulation, guarantees , and income tax advantages that differentiate it from most other types of financial products.
It’s always wise to prepare for the worst. What if the worst thing happens and you don’t live long enough to retire? If you die before retirement – or whenever you die – your whole life policy will pay a generally income tax-free death benefit to your beneficiaries to provide for their future financial needs.
Suppose your healthy lifestyle pays off and you are physically able to enjoy a long, active retirement. Will your savings be affected by market volatility, possibly forcing you to reduce your income?
With whole life insurance you can use your policy’s cash value to provide a stable source of tax-favored supplemental retirement income that is not impacted by short-term market volatility. This is what we call one of the policy’s “living benefits.”
The accumulation of a whole life policy’s cash value is guaranteed and can help provide a reliable source of retirement income, regardless of market conditions. You can depend on your policy’s guaranteed cash value growing to a specific amount over time.
Financial Services Professional
Life is full of uncertainties, but you can take control by being prepared for whatever life brings. You can benefit from working with a financial services professional who has knowledge, experience, insight and an active interest in your financial success.
Howard Bienenfeld, CLU, ChFC
Financial Services Professional
Bienenfeld, Lasek & Starr, LC
Office: (201) 449-0026
Email: [email protected]
Website: www.blsfinancial.com
Howard Bienenfeld is a registered representative of and offers securities, investment advisory and financial planning services through of MML Investors Services, LLC. Member SIPC. 1000 Corporate Drive Suite 700, Ft. Lauderdale, FL 33334. 954-689-9484. Bienenfeld, Lasek & Starr, LLC, is not a subsidiary or affiliate of MML Investors Services, LLC. Services, LLC or its affiliated companies.
