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So, your retirement’s all set?


You are all set to retire in the next year or two. Your retirement date is set. You believe you are ready.

Here comes 2020 and global health and economic crises are in full swing. Suddenly all the plans swirl around your mind: Should I work a few more years? How long is this crisis going to last? Am I fully prepared to retire? These are challenging questions and you want to be confident that the choices you make are right for you.

It is not uncommon for people to change their retirement date. COVID is only one reason people are reconsidering their retirement date, and it’s not always a delay.

According to a 2019 Wells Fargo retirement survey, 55 percent of workers retired earlier than they planned, primarily due to health conditions or a job loss.

Perhaps you’ve lost your job due to the pandemic and feel that the prospects of getting a new one are not good in the current environment. This suggests that retirement might be a good option, but how can you best evaluate this decision?

Retiring is all about income. A good place to start is to identify your sources of income and whether they are fixed or variable. Fixed income includes social security, pension, and annuity payments. You should try to cover your fixed expenses or at least most of them with fixed income.

Next, inventory expenses that cannot be covered with fixed income sources. Do you have control over whether you incur those expenses – and can you cut those expenses in years when you have less income potential in your portfolio?

How much do you currently spend to maintain your lifestyle? Do you expect to maintain your current lifestyle in retirement?

It can be daunting to estimate all future needs and wants, but you must be honest with yourself about income and expenses. If you still have a significant mortgage, or if you have significant debt, perhaps you need to continue to work, even if it is not in your chosen field.

If you are not 65 and eligible for Medicare, what is your health insurance strategy? Individual health insurance is different from your policy with your employer and it is more expensive. As an alternative, consider finding a part time job with health insurance benefits.

Next, evaluate your portfolio – is it set up for withdrawals? Has your portfolio taken a tumble this year and not come back? Do you need a new strategy to help you limit declines in your portfolio due to market losses? Evaluate what withdrawals now will do to your portfolio over time. Withdrawals from a portfolio that is suffering can cost you in the long run.

How much do you need or want to work during retirement? According to an AARP survey, 29 percent of retirees expect to work more than planned in retirement. It is even higher in the 50-64 age group, 40 percent of whom expect to work more in retirement than expected because of the current downturn.

Retiring early and unexpectedly can introduce new sources of risk to your income throughout your life. Working with your financial advisor to rigorously evaluate what might happen is critical to your success.

But there’s another angle: You are thinking about delaying your retirement because of the economic crisis. You are not alone if you are considering a delay. The Simplywise Retirement Confidence Index states that 26 percent of Americans are considering postponing retirement due to the current economic crisis.

If you are healthy and employed, retiring later is typically a smart move. It allows you to delay social security payments until your full retirement age or later which will increase monthly benefits. Waiting may also increase the payouts from your annuities and pensions. You will also have more time to prepare doing such things as reducing debt or adding to your retirement accounts.

Will retiring later reduce your risk? Perhaps, but it is not certain. For example, you have decided to work five more years because you’re

concerned about the pandemic and its effect on the economy. Do you know for sure that the economy will be better in five years? Of course not, because there is always something. Retirement is a 20- to 30-year journey, so there are going to be periods when the economy is suffering or there is some kind of crisis. Expect it and plan for it.

The time to retire, whether earlier than expected or later, is all about preparation. It is about knowing the facts about your situation and what specific risks you may encounter.

If you feel nervous about retiring right now, then delay, but make sure that you use that time to prepare your financial situation for a successful and happy future.

Teresa R. Sanders, MBA, RICP, CFP, is a partner at Aspen Wealth Management, Inc.

Outmaneuvering uncertainty: preparing for retirement during turbulent times

What Matters Most?

These past six months have been exceptionally challenging. Health has been threatened, freedoms restricted, and activities diminished. However, many people report that this period has also caused them to rethink and reprioritize what really matters in life, and spending quality time at home with family members is an old-fashioned recipe for happiness that seems to have made a big comeback during the pandemic.

This period of uncertainty has also highlighted what matters most from an investment perspective – especially when preparing for retirement. What kind of investment approach will enable retirees to successfully ride through turbulent periods like we have experienced with COVID-19 with confidence and peace of mind?

Growing Income for Life

The key to a successful retirement strategy is to replace earned income with retirement income, but of course this is easier said than done. In today’s low interest rate environment, traditional fixed income is not providing enough income for most retirees to live on. Also, due to inflation, a fixed income stream will decline in purchasing power over time. An ideal retirement solution will provide a reliable income stream that can fund current living expenses and that will grow each year at a rate greater than inflation – even during turbulent years like 2020.

A diversified portfolio of high-quality stocks with reliable and growing dividends can deliver a growing stream of annual investment income while keeping savings invested to grow in value over time. The dividend income can be used to fund living expenses which prevents the need to eat into principal during retirement. This is especially important during periods like we have just experienced when market valuations are depressed. If the income is not needed for withdrawals, it can be reinvested as additional savings.

There are three keys to building a dividend growth portfolio that can weather turbulent times:

1. Own high-quality companies. High quality companies have established market positions, experienced management teams, conservative balance sheets and consistent earnings growth over extended periods of time. These companies are built and positioned to not only weather difficult periods but ideally to come out stronger on the other side.

2. Construct a diversified portfolio. Purchase positions in 45 to 55 high quality companies representing a diversity of industries and economic sectors. Challenges will come in many forms over time, and diversification helps ensure the portfolio will continue to meet long-term objectives even if some individual holdings face periods of heightened adversity.

3. Focus on companies with reliable and increasing dividends. Identify companies that have both the ability and the commitment to grow their dividend in all economic environments – especially those that have demonstrated this over an extended period of time. For example, Proctor and Gamble has increased its dividend for 64 consecutive years! An event like COVID-19 can provide a great litmus test for a company’s commitment to dividend growth. Companies that have increased their dividends in 2020, especially those that have announced increases since the onset of the coronavirus in February, have demonstrated that they have both the ability and commitment to raise their dividends in challenging economic environments.

What’s next?

There will always be something on the horizon to worry about – already talk is turning to concerns about the election and the possibility of another market downturn. While it is natural to be on the lookout for threats to our well-being, it is also important as a long-term investor to have confidence in the strength and resilience of our country. Building a retirement portfolio that provides a reliable and growing stream of dividend income makes it possible to weather turbulent times with greater confidence and peace of mind and, ultimately, to more fully enjoy the things that matter most in our lives.

Will  Will Verity is the President and CEO of Verity Investment Partners. Will and his wife Paula founded Verity Investment Partners (recently named to the Financial Times 300 Top Registered Investment Advisors) in 2002 and has over 30 years of experience in the investment industry.

In your 50s? It’s not too late to start saving for retirement

While it can seem daunting to start saving for retirement in your 50s, keep in mind, you are not alone. From paying for a child’s college tuition to taking time off work for health-related issues, there are a number of reasons why someone may not start planning for retirement until later in life.

Fifty-four percent of baby boomers have little to no savings according to the Insured Retirement Institute. If that sounds familiar, then you need to start shifting your mindset from wondering why you put off saving to thinking about what will make you the most successful in retirement. Luckily, there are multiple strategies you can employ to help get you started.

Your highest priority is to get out of debt. Entering retirement with significant debt may set you up for failure. Liquidating your debt, including your mortgage, and then remaining debt-free is one of the best moves you can make as you plan for retirement. The less debt you have, the less money you will need each month to cover your expenses.

You should also think about downsizing your home. You may still be living in the house where you raised your family. Is it too big? Does it cost too much to maintain? Are taxes too expensive? Can you live in your current home into your later retirement years? If you can, do you want to? Depending on your answers to these questions, you should consider selling and moving into a home that will allow you to still enjoy retirement but save some money as well.

Next, create a retirement budget by thinking critically about likely expenses. Don’t forget to factor in health care expenses, which may be vastly higher than you are currently experiencing. Think about what emergencies or life changes could derail your budget. Medical expenses, long-term care or the premature death of a spouse could all be potentially devastating financially. This budgeting exercise is not just about cutting expenses but also thinking realistically about your projected spending in retirement.

A common question people ask is, “how much will I need to fund my retirement?” First, ignore the “retirement calculators” on the internet. They are often not helpful and may discourage you from starting to save. Instead, think about saving in one of two ways. You can ask yourself how much you can save from your current budget and then estimate how much that money will grow over the next 15 to 20 years at a reasonable rate of return. This will give you an idea of what your financial footing will be when you start your retirement.

Next, determine how much you can spend. Estimates fall typically within the three percent to five percent range depending on how you are invested. The other way to think about it is to start by determining what you are likely to spend. After that, you can begin to calculate what you will need to save to maintain your standard of living.

Set some realistic financial goals and commit to regularly investing each month. Consistently putting money into your retirement account is a great habit. It is easier to accomplish financial goals by saving small amounts than by making a single contribution annually, and this strategy will also allow you to potentially capitalize on the ups-and-downs of the market.

Be sure to increase the amount you save each year and take advantage of your 401k if your employer offers one. After 50, you can contribute more to a 401k using the “catch up” contribution rule. The current maximum contribution is $26,000 per year. Even if you do not have access to a 401k, you can still open an IRA and “catch up” with a total annual contribution of $7,000.  

You will want to make sure you are investing wisely. Develop a reliable investment portfolio that fits with your tolerance for risk and allows you to stay invested when the market gets volatile. Now is not the time to take chances on crazy schemes or to move in-and-out of the market. Solid and reliable investments should be your guiding principles. Keep in mind there is no “magic number” you need to hit. Having some money generating additional income is better than having no money. If you are uneasy about whether you are setting realistic goals or have a strong portfolio established, call in a seasoned professional who can help you set up and monitor your investments.

It is also critical to maximize your social security or other benefits. Social security is an excellent source of income because there are cost-of-living adjustments throughout your life. You may need to work longer than planned, however, to ensure that you are fully leveraging the program. Your social security benefit is based on your best 35 years of income. Working just a little longer at a higher income tier may allow you to eliminate some of the lower-income years–increasing your overall benefit in the process.

If you have a pension, work long enough to maximize that as well. It may or may not have a cost of living adjustment, but any lifetime payment is advantageous to your long-term retirement goals. You may even want to consider working part time for a while after you retire to create a little bit more monthly income.

Ultimately, do not let the challenge of starting late on saving for retirement deter you. By setting realistic goals, concentrating on what you can control and practicing financial discipline, you can still build wealth and ensure a secure and sustainable retirement.