JUN. 19, 2019
Life expectancy continues to increase with each generation. As a result, your clients could have more time to enjoy with family, pursue their goals and seek out new experiences. But all these positive expectations can quickly be offset by some significant anxiety if they don’t feel prepared for 30 to 40 years in retirement.
Fortunately, you’re in a great position to help your clients reduce their longevity risk. Of course, the earlier you start talking to them, the easier it may be to make their money last throughout a longer retirement. And we’ve highlighted six strategies to consider.
1. Delaying Social Security
Whether they decide to keep working or retire as planned, you may want to suggest that your clients wait until later to start taking their Social Security benefits. Although they can begin them as early as age 62, delaying until their full retirement age (65, 66 or 67, depending on their birth year1) will ensure they receive their full benefit. And waiting a bit longer until age 70 could increase their monthly benefit by as much as 76%.2 Because Social Security provides a guaranteed stream of income for life, you and your clients will want to make the most of it.
2. Preparing for long-term care
Your clients probably won’t want to think about a time when they may need help dressing and bathing, but it’s important for you to start the conversation. The fact is that people turning 65 today have a 70% chance of needing long-term care at some point in their lives,3 maybe for rehabilitation after a surgery or some more permanent need. Since Medicare doesn’t cover most types of long-term care, your clients will need your help preparing so they’ll have the necessary funds available when they need them.
3. Using HSAs as investment vehicles
Any clients covered by a high-deductible health insurance plan may have access to a health savings account (HSA). And there’s a good possibility they’re overlooking its value as a retirement savings vehicle — many people do. But you can help your clients understand that money left over after they pay current medical expenses may accumulate for future years and retirement. There’s no use-it-or-lose-it limitation. Plus, they can invest it into mutual funds or exchange-traded funds for more growth potential.
4. Keeping equity investments longer
When your clients know they can rely on a guaranteed lifetime income from Social Security or other investments, such as an annuity with a lifetime income rider (typically available at an additional cost),4 they may be more comfortable keeping equities longer during retirement. That could be an important part of your plan, since it may help their portfolio grow more, keep pace with inflation better and last longer.
5. Testing portfolios for tax efficiency
Encourage your clients to further diversify their portfolios so they include taxable, tax-deferred and tax-free investments. You’ll be able to structure their withdrawals with taxes in mind, helping them control how much they pay in taxes and when they pay them. Establishing a tax-efficient income strategy like this could extend the life of their portfolio up to six years.5
6. Incorporating spouses into the planning
Your clients may not want to think or talk about their spouse dying, but it’s important that they plan appropriately with you. That’s because many of these strategies include elements of spousal protection, and in some cases your clients will need to take steps to ensure they’ll be able to exercise them. For example, if your client with an HSA names his or her spouse as beneficiary, the spouse will become the account owner at your client’s death and can use it for his or her own medical expenses.