611 Druid Rd E • Suite 105 • Clearwater, FL 33756 • 727.441.9022
Meridian One Building • 4350 West Cypress Street • Suite 225 • Tampa, FL 33607 • 813.405.4846
LONGEVITY RISK IN RETIREMENT
One of the greatest fears expressed by many is the concern of
outliving their money in retirement. After all who wants to move
in with the kids, go back to work, or decrease their standard of
living? With medical science solving many of the issues around
disease (with more to come in the future) and with better life styles
and choices around eating habits, exercise, smoking, etc., many
are easily living into the 90s and beyond. In fact, the percentage
of those reaching 100 is the fastest growing slice of the population.
So here is the question – if you retire at age 65, then how long
must your savings last? The most common answer is “maybe to
age 85”. The fact is according to Social Security the median (half
higher/half lower) age to which a male age 65 will live is age 84,
and for women it is even higher. When we write a financial plan,
we usually project at least to the youngest spouse’s age 95. Many
say, “Oh, I won’t live that long”, but what if they do? If we only
knew the exact date of death, then planning would be so easy.
What are ways to protect against out living assets? First, continue
working. For many baby boomers age 65 is no longer the “normal”
retirement age. Full retirement age with Social Security is 67 for
younger baby boomers. Thus, many are planning to wait until
then. Each additional year of work, is one more year of potential
savings, one less year of spending from the nest egg and one more
year of potential growth. For couples, having the larger earning
spouse wait to begin Social Security at age 70 (maximum benefit)
can make a lot of sense.
Next, do everything you can to pay off all debt including
your credit card, automobile loans, student loans and in some
cases the mortgage before retiring. Assuming that goal has been
90 TAMPA BAY MAGAZINE | JANUARY/FEBRUARY 2019
V. Raymond Ferrara, CFP®
Chairman
Chief Executive Officer
Eric R. Ebbert, MBA, CFP®
President
Chief Operating Officer
accomplished then plow as much money as you can into retirement
plans like your 401k, IRAs (regular and Roth), and general savings,
especially the last five years leading into retirement.
If you no longer have a need for cash value life insurance consider
cashing in the policies and reinvesting into other more productive
investments (yes, we can hear the life insurance agents howling
now) or possibly do a 1035(a) tax free exchange to a low cost
annuity. Choices range from those which pay immediately, those
which are deferred to a time in the future (20 years from now),
and/or those which are investment oriented. Before doing so,
however, consider your current state of health, surrender charges,
potential taxes and other factors.
Health care and long term care costs are often underestimated.
Fidelity does a study every year and they currently predict that
the average retired couple will spend over $250,000 on health care.
Medicare is not free, in spite of the urban myth to the contrary.
Either due to mental or physical issues, many will spend some
amount of time in a long term care facility. Very few people think
about this issue in the retirement planning process. Long term
care insurance is not inexpensive, but neither is the cost of a long
term care facility. Medicaid is available only to the neediest, so
don’t rely on it.
In short, people don’t plan to fail, they simply fail to plan. That
is why we place such a strong emphasis on financial planning.
Please take advantage of a complimentary discussion with us
regarding longevity risk and other retirement planning matters.
We have offices in Clearwater and Tampa.
About ProVise Management Group, LLC: ProVise is a financial planning and investment management firm registered with the Securities and Exchange
Commission (SEC) and has been in business since 1987. Our 14 professional advisors serve approximately 1100 clients in over 30 states. As of 06/30/18 we were
managing approximately $1.445 billion for our individual, corporate, not-for-profit and 401k retirement plans. Please visit our website at: provise.com. Investment
Advisory Services offered through ProVise Management Group, LLC. The information herein is general and educational in nature and should not be considered
legal or tax advice. Tax laws and regulations are complex and are subject to change.