MKA Executive Planners Blog

For most people retirement planning is about the number.  How much do I need to have invested at retirement to support my lifestyle for the balance of my life?  In most cases financial advisors will structure an investment savings program based upon five primary considerations: (1) how long before your retire, (2) how long will you live after retirement, (3) what is an appropriate assumed after tax rate of return on investments, (4) an appropriate rate of inflation, and (5) other sources of income such as social security, or pensions.  This is a daunting task with a number of important variables. 

The number one risk in retirement is longevity risk.  Once you retire, the amount of money required to cover your retirement needs increases with number of years before death.  For example, if you were to die three years after retirement, the amount you need is not significantly impacted, but the various investment risks (i.e., market risk, inflation, etc.).  If, however you live to age 85, 90 or older, the amount you need at retirement is significantly lager, and the impact of the various investment risks is significantly more.

So often we hear the excuse, "I can't afford to buy life insurance."

The reality is that because life insurance is tied to thoughts of one's own death, there is an automatic mental barrier to its purchase.  This can be offset by focusing on the living benefits of life insurance, which today include accumulation of cash surrender value that grows in many ways: interest credited by the insurer, performance of stock indexes or performance of funds that directly invest in various markets and companies.  These funds can be utilized for emergencies or to provide retirement income.

Studies have shown that Americans don’t plan well for retirement.  Whether it is, “What am I going to do with 40 to 60 hours a week of leisure?”  Or, “How much will it cost to fill that open time?”  It is likely that you have not put pencil to paper, perhaps not even have it on your radar.  Remember that a great plan requires time and effort. 

The Boston Herald recently published an opinion piece by Barry Koslow that focuses on some of the problems the Massachusetts retirement system is facing. Here’s how the piece begins:

It is becoming more and more obvious that we all need to pay more attention to our long term need for capital accumulation.  Concerns are growing that the current dysfunction of our federal government and the continuing growth of entitlement programs may force more and more of the middle and upper classes to become self-reliant.  It is not a question of approval of the current direction of government.  It is whether the resources will be there to meet the promises made, while providing for other needs such as defense, infrastructure, etc.