No one wants to work forever, and most people work diligently to invest, plan, and save in order to retire as quickly as possible. As you work to build your nest egg, most do this with the assumption that it will all be theirs to freely use once they officially retire. However, once these funds are accessible, there are still obstacles to consider that many people don’t anticipate—and a few creative ways to still make the most of your assets.
Making the Most of Your Nest Egg
Because of market shifts, taxes, inflation, and other factors, many people find that they are having to budget far more in retirement than they did when they received a steady paycheck—in fact, the current recommended investment withdrawal rate is approximately 3% (e.g., $2,000,000 of savings capital x 3% in earnings and dividends = $60,000 pre-tax income). In spite of this, many people end up spending more than they anticipated within the first several years of retirement as they make the purchases and take the trips they have always dreamed about during their working years. When you combine the need to budget, the increased spending, and the rising cost of medical care for those aging, it can lead to a major lifestyle shift later on in retirement as people realize their funds may not stretch as far as they hoped.
This is not what people typically want to hear as they approach retirement age, but if you can change your approach to retirement savings, you can also change the outcome. The most common advice when preparing for retirement is to invest at your preferred risk tolerance and allocation, build up your 401(k) and rely on Social Security checks for a routine income payment, but by getting creative with your life insurance, you can find additional ways to actively enjoying your assets in retirement instead of worrying about the budget.
How Life Insurance Factors Into Retirement Income
Many people have the common perception that now that my kids are grown, I can drop my life insurance policy so I can save, and even invest that money I was spending on the policy. The loss of the life insurance death benefit from your balance sheet will have a significant impact on your ability to access other assets in retirement. What is not realized is that you are losing much more than just the death benefit associated with the life insurance policy; you are losing the freedom to live your retirement life to the fullest. Rather than looking at permanent insurance as a cost, it is important to see it as an asset class with a promise.
By having a great protection strategy in retirement, you are able to enjoy your wealth with the security of knowing that your policy removes legacy planning concerns and may also increase your expected retirement income. Your permanent protection will allow access to your assets including the principal and its earnings. Overall, a retirement plan that factors insurance into the strategy may work better for you—and for the rest of your family—than one that does not. You may also count on this policy to provide long-term care, approximately at one-fourth the cost of a stand-alone long-term care policy annually, with appropriate riders.
If you’d like help learning how to make the most out of your retirement income, we’re here to help. Contact Huskey Financial today to learn more about creative ways to help you save.
This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice. Links to external sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents, and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services, and make no representation as to the completeness, suitability, or quality thereof.
Michael Steven Huskey is affiliated with Consolidated Planning. He is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 4201 Congress St., Ste. 295, Charlotte, NC 28209; 704.552.8507. Securities products offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly-owned subsidiary of Guardian. Consolidated Planning is not an affiliate or subsidiary of PAS or Guardian. 2020-105978 Exp 07/22