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Archives for May 2019

The financial consequences of living a long life

Kane Tenaka lives in Japan and loves playing board games, studying math, and practicing her calligraphy. But the most remarkable thing about Kane Tenaka is that she’s 116 years old, and was just recognized as the oldest living person in the world.

These stories are always a great wake-up call that we’re living longer than ever before.

In fact, the number of people who will live to 100 is projected to swell from 500,000 people today, to more than 3.7 million in the next 30 years.

Living a long and prosperous life is something we all wish for, but it also comes with four significant financial challenges …

#1 The longer you live, the more you’ll pay in healthcare and medical expenses.

According to the latest estimates, the total out-of-pocket spending for the average 65-year-old couple retiring today could be north of $400,000 when you factor in Medicare premiums, supplemental insurance premiums, deductibles, and copays. And those with known health issues could be on the hook for even more money!

#2 The longer you live, the greater the chance you’ll need some form of long-term care.

According to U.S. Department of Health and Human Services, Nearly 70% of all people who live to age 65 will require some form of long-term care.”

And long term care doesn’t come cheap. According to Forbes, the average cost for an assisted living facility is $47,064 per year. A semi-private room at a nursing home with around-the-clock care is $91,615 per year.

#3 The longer you live, the greater the chance you’ll face major stock market corrections.

According to Kiplinger, “From 1926-2017, bull markets lasted an average of 9 years.” If you do the math, that means every decade (or so) your savings and investments could take a major haircut. And if you must withdraw money from your retirement accounts during these market downturns (to live on, or because of Required Minimum Distributions), the long-term effects could potentially be financially devastating. 

#4 The biggest challenge of all: How do you pay for it?

The longer you live, the longer you have to make your money last in in retirement. And unfortunately, the greater the chances you have of running through your entire life savings far too soon.

According to a recent article from MarketWatch“40% of Americans are at risk of going broke in retirement.” Most people assume this will just impact the people with little means. But that’s not the case. It could also happen to people who are middle class, and even those who are wealthy. Nobody’s exempt.


The last place you want to be is 85 or 90 years old, full of life and flat broke.

Your best defense to ensure you don’t run out of money in retirement is to have a thorough and comprehensive financial game plan. This includes maximizing your Social Security benefits; reducing your taxes; generating income (that lasts as long as you do); a plan to protect you from the skyrocketing cost of healthcare and long term care; and managing your risk.

Why Diversifying Your Income is Critical in Retirement!

Here are some recent headlines from The Wall Street Journal, MarketWatch and Investment News that should get your attention …

  • “Medicare trust fund will be exhausted in 2026.”
  • “Social Security to Tap into Trust Fund for the First Time in 36 Years.” 
  • “Stock Market Returns Over the Next Decade Will be Well Below Historical Norms.”
  • And “The Pension Hole for U.S. Cities and States is the Size of Germany’s Economy.”

Social security, Medicare, pensions, and stock market returns are all critical components of your retirement. But their financial stability is now in question. If you’re counting on any of these things to help support you, you have good reason to be concerned.

In a best-case scenario, this could have a serious impact on your lifestyle in retirement. In a worst-case scenario, it could force you back to work.

This underscores one very critical thing. You can’t rely on just one source of income in retirement. You must have a diversified number of income sources.

We will be covering why diversifying your income sources in retirement could help you avoid a financial disaster, as well as how to navigate the critical challenges ahead with Medicare and social security, your options to generate income today – no matter what’s happens next on Wall Street, and more.

Successful retirements are not built on assets, or the amount of money you’ve saved, they’re built on your ability to generate income in retirement. Stock markets go up and down, but your income is the backbone of your retirement game plan. You need a plan to make your money break a sweat.

Generating income is tougher today than ever before. Traditional “go-to” options for generating income are dead. Pensions are all but history. Although interest rates are on the rise, they are still historically low, meaning rates on CD’s and savings accounts are a joke. $500,000 in a one-year CD today will only fetch roughly $700 a month. And that’s before taxes! And it doesn’t look like these rates are going to significantly change anytime soon. Bond yields aren’t any better, and people still fear investing in a stock market that remains at near highs. Historically speaking, we are well overdue for a bear market.

According to a recent Kiplinger – From 1926-2017, bull markets lasted on average nine years. If that is the case, this bull market should be ending right about now, as it just turned 9 on March 9, 2018. Also, the typical bear market lasts 1.4 years, with an average cumulative loss of 41%. This mean trouble is on the horizon (just look at the recent volatility).

Show me someone who lives in constant fear of running out of money, and I’ll show you someone who doesn’t have a plan to generate income. It’s that simple. However, you can’t just have an income plan, you need a diversified income plan. It’s risky to rely on one source of income in retirement. The following are some potential sources of income, but this is where you should use your expertise to go over these topics in detail.

  • Dividend stocks – Most mature companies pay a recurring dividend to shareholders. In most cases, these dividends are paid quarterly to shareholders who owned the stock on the date of record. Typical yields for most dividend focused ETFs are 2-3%.
  • Investment grade corporate bond fund – has bond holdings from highly-rated companies in a proportion that is meant to mimic the indices they track.
  • Municipal bonds – debt obligations issued by states or other municipalities to fund projects. Some, but not all municipal bonds are exempt from federal tax for all investors and exempt from state tax if the investor lives in the state of the municipality issuing the bond.
  • REIT – Real estate investment trusts own a portfolio of real estate, the purchase of which is financed by debt and the issuance of securities to investors. A REIT can be public or private and open-end or closed-end.
  • Reverse mortgages – the bank pays you, you keep your home, and it remains part of your estate. Essentially, you are putting your home equity to work for you.
  • Commercial/residential/multi-unit real estate – Buying a rental property is a rather straightforward proposition, especially if you know the local market well that you’re investing in.
  • Annuities – insurance products that pay out over your lifetime, no matter how long you live. And these products have come a long way over the last few decades.

However, the specific strategies that will be used for you will be totally different than anyone else, because even a minor difference in your age, assets, risk tolerance, or life expectancy could trigger a major shift in strategy.