How long will you live? It’s one of life’s biggest questions. Time can pass quickly. If you’re like most people, you’ve wondered just how much time you have left. Of course, it’s also an impossible question to answer. We can’t predict the future; thus we can’t determine precisely when we will pass away.
However, we can use data to make an educated guess about how long an individual’s lifespan will be. In fact, there’s an entire group of professionals dedicated to that effort. They’re called actuaries, and they’re often employed by insurance companies. Actuaries are highly trained professionals who rely on a deep understanding of mathematics and statistics to help companies manage risk. In the life insurance industry, that often means estimating how long a person is likely to live. Fortunately, you don’t have to be a trained actuary to estimate how long you might live. The Society of Actuaries and the American Academy of Actuaries have partnered together to make their work accessible online. You can use their Longevity Illustrator to estimate your life expectancy and how long you may live in retirement. You submit some basic information about your age, gender, and health to the Longevity Illustrator. It then generates conclusions about your life expectancy. The conclusions are conveyed in a range of probabilities. For example, it may tell you that you have a 90% probability of living to 75 but only a 10% probability of living to 95.1 You can even submit information for you and your spouse and get the probability that one or both of you will live to certain ages. Why is it helpful to know your life expectancy? Thinking about your own death certainly isn’t a pleasant experience. You might even think it’s someone morbid to estimate the timing of your own death. However, understanding life expectancy can help you better plan for retirement and make your assets last. Assume you plan on retiring in your mid-60s and you’ll rely on withdrawals from your 401(k), IRA, and other savings to fund your lifestyle. How much should you take in withdrawals each year? How long do you need your savings to last? Ten years? Twenty? Thirty? Life expectancy helps you answer those questions. Again, you can’t predict exactly how long you will live. But you can make a reasonable estimate based on probabilities. If you know there is a reasonable probability that you’ll live into your 90s, you may change your spending habits in retirement so your assets will last. You can even use your life expectancy estimate to determine how much you should withdraw from your savings each year. How can you make sure your income lasts for life? While the Longevity Illustrator is a helpful tool, it is still an estimate. You can’t truly know with 100% certainty how long you will live. Fortunately, you can use guaranteed* income to create financial certainty and stability in retirement. Guaranteed* income lasts for life, regardless of how long you live. Social Security is an example of guaranteed* income. A lifetime pension benefit is another example. You can even use a financial vehicle like an annuity to create your own guaranteed* lifetime income. Many annuities offer the opportunity to convert a portion of your savings into an income stream that is guaranteed* to last as long as you live. A financial professional can help you identify strategies to maximize your guaranteed* retirement income. Ready to create retirement income that lasts for life? Let’s talk about it. Contact us today at First Fidelity Group. We can help you analyze your needs, estimate your life expectancy, and implement a strategy. Let’s connect soon and start the conversation. 1https://www.longevityillustrator.org/ *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19534 - 2019/12/10 Retirement is supposed to be a joyous occasion. After all, this is the time when you get to leave the constraints of a busy career behind. You’re free to set your own schedule and spend your time as you wish. There’s no boss to report to. No clients to manage. No big projects to complete. You’re free to do whatever you like.
So why is retirement so difficult for many people? Very often, new retirees realize that this new phase of their life isn’t all they had expected. They miss socializing with their colleagues at work. Without a job, they feel a lack of purpose. They have trouble transitioning to life at home. In fact, a recent study showed that retirees were twice as likely to suffer from depression as those who are still working.1 The good news is you can take steps to ease into retirement and pave the way for a smooth transition. Below are a few tips to consider as you leave the working world: Structure your day. During your career, you likely had a set schedule. You had tasks, obligations, and goals you wanted to achieve. You may have even had a to-do list. Just because you’re retired doesn’t mean you have to abandon that structure. If you get comfort from having a list of tasks or objectives, keep doing it in retirement. Set a schedule for the next day. Instead of focusing on work-related tasks, you can pursue a new hobby, meet with friends, or even do something nice for your grandchildren. A structured day could help you fulfill your need for productive activity. Set short-term goals or milestones. At work, you’re always looking forward to the next milestone. Maybe it’s landing a new client or finishing a big project. In retirement, you may not get that same feeling of achievement or success. In retirement, you may feel depressed or anxious without a similar set of goals or objectives. Just because you’re no longer working doesn’t mean you can’t have goals. Plan a big vacation for you and your spouse. Take up a new activity or hobby and set goals for yourself. You could even volunteer for a favorite charity and take on a big fundraiser or similar project. You could coach your grandchild’s sports team. By setting short-term goals you can give your retirement a sense of purpose. Make new friends. Maybe you think of your coworkers as friends or maybe you think of them as merely colleagues and acquaintances. Either way, they may play a major role in your social life. They’re a source of adult interaction and socialization. After you retire, you may find that you miss your coworkers and the daily conversation you have with them. Socialization isn’t just important for your mood and happiness. It’s also important for you health. A recent study found that retirees with large social networks had a 26% lesser chance of developing dementia.2 Look for opportunities to make new friends in retirement. You could pursue a hobby or join a group of like-minded people. You could volunteer. Many community centers offer outings and activities for retirees. Be proactive in expanding your social circle. It could make your retirement happier and even healthier. Ready to plan your transition into retirement? Let’s talk about it. Contact us today at First Fidelity Group. We can help you analyze your needs and develop a strategy. 1https://www.usatoday.com/story/money/2019/06/11/depression-during-retirement-how-cope-and-prepare/1416091001/ 2https://brainworldmagazine.com/friends-with-benefits-socializing-to-fight-alzheimers/ Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19535 - 2019/12/10 The government passed a year-end spending bill in December, and it included one piece of legislation that could have a big impact on retirees. It’s called the SECURE Act. The bill’s name is an acronym for Setting Every Community Up for Retirement Enhancement.
The legislation is aimed at helping Americans save more for retirement. While many of the changes will certainly be helpful, they may also require you to revisit your retirement strategy. The SECURE Act affects many different areas, from your 401(k) plan to your IRA to even how you take withdrawals in the later stages of retirement. Below are some of the biggest changes in the SECURE Act: Elimination of” Stretch” IRA The biggest change in the SECURE Act may not impact you but rather your IRA beneficiaries. The SECURE Act eliminates the ability to “stretch” an IRA, which was a strategy commonly used by non-spousal beneficiaries to reduce their tax burden and continue to grow the account. Under a stretch IRA concept, your non-spousal beneficiary, like a grown child for example, could simply withdraw your RMDs on annual basis from the IRA after you pass away. Because they are taking the minimum amount from the IRA, they reduce their annual tax obligation. They also leave assets in the IRA to continue growing on a tax-deferred basis. The stretch IRA is no longer an option, however. Under the SECURE Act, all non-spousal beneficiaries must take the full IRA balance within 10 years. The only exceptions are minor children and handicapped individuals. If you plan on leaving your IRA to someone other than a spouse, you may want to review their options. RMD Age Most qualified accounts like IRAs and 401(k) plans have something called required minimum distributions, or RMDs. These are withdrawals that you are required to take each year once you hit a certain age. Traditionally, RMDs have started at age 70½. However, the SECURE Act pushes the RMD start age back to 72. That means you’ll have eighteen additional months of tax-deferred growth in your 401(k) or IRA before you have to start taking taxable withdrawals.1 Traditional IRA Contributions RMDs aren’t the only reason why 70½ has historically been an important age. That’s also the age at which point you could no longer make contributions to a traditional IRA. Until now. The SECURE Act eliminates the age limit on traditional IRA contributions. That means you can continue making contributions well past 70½. That could be especially helpful if you plan on working in retirement and want to continue to bolster your savings.1 401(k) Plans for Part-Time Employees and Small Businesses The SECURE Act has also made 401(k) plans more accessible for part-time employees and employees at small businesses. In the past, 401(k) plans were usually reserved for full-time employees. However, under the SECURE Act, companies are required to offer 401(k) eligibility to any employee who works 1,000 hours in one year or 500 hours in three consecutive years.1 It’s also been difficult for many small businesses to offer 401(k) plans. These plans often have high startup and administrative costs that can be burdensome for small businesses with a tight budget. The SECURE Act aims to resolve that problem. The new law offers up to $5,000 in tax credits to offset 401(k) plan startup costs for small businesses. It also allows small businesses to pool together to offer 401(k) plans to their employees. 401(k) Plan Income Strategies The SECURE Act also focuses on how 401(k) plans can generate income for participants. Plans must now deliver “lifetime income disclosure statements” each year. This document will show you exactly how much income your plan could generate for life if you used the balance to purchase an annuity. The law has also made it easier for 401(k) plan participants to access annuities with guaranteed lifetime income features. The SECURE Act eliminated some regulatory issues that had prevented annuities from being common strategy options in 401(k) plans. With those issues resolved, participants can now use their 401(k) funds to create guaranteed lifetime income through the use of an annuity. What Should I Do? These are some of the biggest changes to retirement plans in decades and it would be wise to re-evaluate your retirement plan. By meeting with a financial professional, we can help you evaluate your current plan and how you may want to adjust based on these recent changes. There are certain things you may want to look at differently, including some sophisticated tax planning opportunities, that only a professional can truly help you understand. Ready to review your retirement strategy to see how it is impacted by the SECURE Act? Let’s talk about it. Contact us at 337.560.1805 today so we can help you analyze your current plan and develop a winning strategy. Don’t wait, the sooner we can help you evaluate your needs, the sooner you can feel confident about the plan you have in place. Let’s connect soon and start the conversation! 1https://www.fidelity.com/learning-center/personal-finance/retirement/understanding-the-secure-act-and-retirement Licensed Insurance Professional. We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. 19636 - 2020/1/13 |
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