Retirement Planning is All About the Match-Ups

Whether you’re a man who likes sports, or a woman who fancies sportswear, it’s always about the match-up. Size and strength; speed and skill; bags and shoes; scarves and belts. No different is retirement planning, where one attribute can be a complement or trade-off to another.

As a backdrop to a discussion of match-ups, it helps to accept or recognize several retirement planning tenets: The standby 4% annual asset withdrawal rate is now below 3%. Prevailing low interest rates have made safe-haven investments like CDs a break-even proposition. Certain expenses are not only inevitable, but annual, and bound to rise over time. To counter these forces, strive to win these match-ups:

Income vs. expenses: Don’t carry a mortgage if possible, and budget for guaranteed monthly expenses including utilities, transportation, food, property taxes and Medicare. Match these up with common lifetime income streams like pensions and Social Security, and complement them with 401(k) or non-retirement assets.

Portfolio composition vs. risk tolerance: Studies show women’s’ 401(k) accounts to be more consistent with their investment comfort zones than their husband’s. Experts advocate achieving not only an alignment, but conservative adjustments over time, to protect against volatile markets and another 2008-like meltdown, which Baby Boomers cannot afford to take.

Certainty vs. longevity: Average life expectancies are now 86 years for men, and 88 for women. The longer-trending life spans are exemplified by the current 72,000 centurions - individuals age 100 or more. Fixed index annuities are an increasingly popular product that can deliver guaranteed lifetime income to outlast other assets, and even an account balance of zero. Principal amounts are paid to an insurance company, not a bank, to produce a specified monthly payment beginning at a designated age. Changes in funds’ values are tied to common indexes, and a floor protects against loss compared to the prior year-end account value. Increased payouts can offset the unreliability of Social Security cost-of living increases.

Given the forces of change and the uncertainty of longevity, a checkmate, match-up strategy can allow you to be the king or queen of retirement, and not the pawn.