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Six ways to help clients prepare for a longer retirement

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.

  • 1

    Social Security Administration (2019).

  • 2

    Based on an individual with a full retirement age of 66 and comparing filing at age 62 for 75% of the primary insurance amount versus filing at 70 for 132% of the primary insurance amount.

  • 3

    “How Much Care Will You Need?” U.S. Department of Health and Human Services (Oct. 10, 2017).

  • 4

    All guarantees are backed by the claims-paying ability of the issuing insurance company.

  • 5

    “Tax-Efficient Withdrawal Strategies,” Cook, Meyer and Reichenstein, CFA Institute publication, Volume 71, No. 2 (2015).

    • Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value

    HSAs are not taxed at a federal income tax level when used appropriately for qualified medical expenses. Also, most states, but not all, recognize HSA funds as tax-free.

    Federal income tax laws are complex and subject to change. The information in this memorandum is based on current interpretations of the law and is not guaranteed. Neither Nationwide nor its employees, agents, brokers or registered representatives give legal or tax advice.

    This material is not a recommendation to buy, sell, hold or roll over any asset, adopt an investment strategy, retain a specific investment manager or use a particular account type. It does not take into account the specific investment objectives, tax and financial condition or particular needs of any
    specific person. Investors should discuss their specific situation with their financial professional.

    Investing involves market risk, including the possible loss of principal.

    Before investing, have your clients consider vehicle and investment objectives, risks, charges and expenses.

    Nationwide Investment Services Corporation (NISC), member FINRA, Columbus, Ohio. Nationwide Retirement Institute is a division of NISC.

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    NFM-18493AO (06/19)