3568: 5 Ways to Solve Your Top Retirement Concern - Outliving Your Money by Kathleen Coxwell on Retirement Security

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[00:00:47] This is Optimal Finance Daily. 5 Ways to Solve Your Top Retirement Concern – Outliving Your Money by Kathleen Coxwell

[00:01:01] Are you worried about outliving your money? Join the club! This is one of America's biggest retirement fears. More than half, around 57%, of CPA financial planners cited running out of money as the top concern for their clients, according to the American Institute of CPA's Personal Finance and Financial Planner.

[00:01:21] The survey sought insight from nearly 550 CPA Financial Planners, many of whom work with high net worth individuals on the major retirement planning challenges and concerns facing Americans today. When asked about the top three sources of clients' financial and emotional stress over outliving their money, financial planners cited

[00:01:45] Healthcare costs at 76%, market fluctuations at 62%, lifestyle expenses at 52%, unexpected costs at 47%, the possibility of being a financial burden on their loved ones, 24%, and the desire to leave an inheritance for children, 22%.

[00:02:10] Lyle K. Benson, chair of the AICPA's PFP Executive Committee, in a statement on the survey's findings, said, With all the financial uncertainty surrounding retirement, running out of money is directly tied to a number of issues that high net worth clients are juggling simultaneously, end quote.

[00:02:32] To address this uncertainty, AICPA suggests five ways financial planners can help their clients prepare for retirement to reduce the risk of outliving their money. Number one, lifestyle. AICPA says that you should understand the impact of your lifestyle spending and implement a plan that balances your current income level and asset base with your retirement goals.

[00:02:57] Often, financial planners will suggest their clients either cut back on their current lifestyle or continue working through retirement in order to provide some extra cash flow. Doing so will help offset some of the costs associated with unexpected events that could derail your retirement if you're not properly prepared. Such unexpected events are having a big impact on retirement planning for a large number of clients, according to the AICPA survey.

[00:03:25] These issues include long-term health care concerns impacting 42% of clients, caring for aging relatives, 28%, diminished capacity, 26%, divorce, 18%, job loss, 18%, and adult children returning home, 18%. Troy Simmons, vice president of the Nationwide Retirement Institute says, quote, Make sure all your ducks are in a row.

[00:03:55] What have you done to plan for the unexpected? End quote. Number two, living situations. AICPA found that it may be possible to identify strategies such as the use of continuing care retirement communities to both control costs and save on taxes.

[00:04:14] At these senior living communities, residents can have peace of mind knowing that they'll be able to age in place without having to worry about such issues as home repairs and modifications or health care problems. Other options for cutting housing costs might include consideration of downsizing or securing a reverse mortgage. Number three, health care.

[00:04:38] AICPA finds that it's important for everyone to understand Medicare and insurance options so you can better plan for potential health care costs you might need to cover. Behind running out of money in retirement, financial planners reported that their client's top retirement concern was uncertainty on how much to withdraw from retirement accounts, 14%, and health care costs, 11%. In addressing the rising costs of health care,

[00:05:06] many financial planners suggest their clients delay collecting Social Security benefits until age 70. Doing so could translate to an additional $300,000 in benefits over the course of a couple's lifetime, or $100,000 during an individual's lifetime. Number four, tax savings. Coordinate Roth conversions with IRA-required minimum distributions, investing in assets with a lower tax rate, AICPA suggests.

[00:05:36] Benson said in a statement, quote, to help alleviate their client's longevity concerns, CPA financial planners integrate tax planning strategies to maximize income in retirement. This approach considers a client's current situation and anticipates their lifestyle spending in retirement to ensure they stay on track in the event of an unexpected life event, end quote. Number five, portfolio diversity.

[00:06:03] Mitigate the effect of market fluctuations with proper asset allocation, bucket strategies, and the use of single premium annuities, AICPA says. Roughly 66% of the survey's respondents indicated that up to 25% of their clients use annuities as an investment or income vehicle for longevity. Using such financial products to provide guaranteed income streams can help you feel more comfortable

[00:06:30] and confident when it comes to making your money last in retirement. However, before signing on the dotted line or making any big financial moves, talk with a financial planner who can help you strategize for your future. Are any of these solutions right for you? Maybe you've already enacted some of these strategies. Maybe none of this makes any sense at all to you. Retirement planning is complicated. You can do it on your own or you can get help.

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[00:08:51] The times you're deep in your flow and the absolute last thing you need is an auto-update throwing off your momentum. That's why Dell builds tech that adapts to the way you actually work. Built with long-lasting batteries so you're not scrambling for the closest outlet. And built-in intelligence that makes updates around your schedule, not in the middle of it. They don't build tech for tech's sake. They build it for you.

[00:09:16] Find technology built for the way you work at dell.com slash dellpcs. Built for you. Retirement isn't about reaching a certain age. It's more like solving a dynamic mathematical puzzle. The goal is for your investments to reliably cover your living expenses at a safe withdrawal rate. And most of us use our current expenses as a starting point.

[00:09:43] While there are countless calculators and simulators online, they're only as good as the assumptions we plug into them. And this is where the fear of running out of money comes in. There is some uncertainty around how long we will live. And it's impossible to anticipate unknown expenses decades into the future. But I do think it's possible to not live in fear. If you've been a good steward of your money through accumulation,

[00:10:11] you likely had to be flexible and adapt to the obstacles life has thrown at you. It's no different in retirement. There are great rules of thumb and financial modeling techniques to give you a reasonable degree of financial security. But then the key is to regularly adjust your plan as the need arises. If you want to dig deeper into this topic for extra assurances, I recommend you check out the article titled,

[00:10:38] Why You'll Probably Never Run Out of Money by Mr. Money Mustache. And that'll do it for another edition of Optimal Finance Daily. Thank you so much for subscribing or following the show and sharing with others. Have a great rest of your day and I'll see you tomorrow where optimal life awaits.