A Simplified Approach to Retirement

Step One: Cover Your Domestic Expenses You and your spouse need to select a budget that outlines your domestic spending and routine trips like visiting the grandchildren or going on church missions. Once you’ve collected all your bills and travel costs, assess them against your Social Security income and corporate or government pension. If there is a short fall, you should look at two strategies: 1) guaranteed lifetime annuity with a cost-of-living adjustment for you and your spouse. 2) Consider the home equity conversion program that can generate income, eliminate your mortgage or create a money reserve for later in life. 

Step Two: Protect Your Portfolio Against Inflation You and your spouse need to take a risk-tolerance test and share the results with each other. Then, you both need to work at establishing common-ground principals with your portfolio purchases and the mix of your investments. One rule of thumb is to buy equities with returns greater than inflation, with low expense charges and low beta risk. It may also be prudent to consider guaranteed lifetime annuities with a cost of living rider to be part of your inflation strategy. 

Step Three: Insure Your Legacy and Giving with Life Insurance You and your spouse need to make a list of family members and charities you desire to help after you’re gone. If you and your spouse are in relatively good health, you should investigate Survivorship Guaranteed Universal Life (SGUL). This type of life insurance can cover both spouses and, depending upon your situation, may transfer the death benefit proceeds tax free to your beneficiaries for pennies on the dollar. Then, you can enjoy your retirement knowing your family members and charities are funded. One word of caution: The leverage of life insurance delivers more bang for the buck for beneficiaries than home equity, so use your housing wealth while you’re living.

Step Four: Indemnify Yourself Against Elder Care Costs No retirement strategy can be complete without long-term care strategy. The most expensive costs in retirement are medical and elder care costs. Medicare can take care of the bulk of the medical costs you’ll incur, but you still need elder care strategy. There are conventional long-term care insurance policies as well as hybrid polices combined with life and annuity contracts. If your health is an obstacle for securing coverage, consider one of the home equity conversion mortgage program called an appreciating equity line of credit as a money reserve for later in life.

These four steps are the building blocks that can be used to construct a comprehensive retirement plan, but if additional sophistication becomes necessary, you’ll need a professional financial advisor whose area of expertise addresses all aspects of retirement. If you’re interested in reviewing these four steps for yourself, just write me at steve@onthemoneynews.com