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
RETIREMENT INCOME SURE, BUT WHEN,
WHERE AND HOW?
V. Raymond Ferrara, CFP®,
Chair/CEO
ProVise Management Group, LLC is a financial planning and investment management firm registered with the Securities and Exchange Commission
and has been in business since 1986. As of 9/30/2021 we were managing approximately $1.6 billion for our individual, corporate, and not-for
profit clients. Investment Advisory Services are offered through Provise Management Group, LLC. ProVise’s Form CRS can be obtained at
https://www.provise.com/wp-content/uploads/2021/04/FormCRS_040121.pdf. 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.
JANUARY/FEBRUARY 2022 | TAMPA BAY MAGAZINE 39
You worked your entire life and that
paycheck kept coming every two weeks.
You retire and POW, no more money is
deposited into the bank account. How do
you ensure that you will have sufficient cash
flow to pay the bills? It can be a disconcerting
problem that keeps many a retiree up at
night. When do you start? Where does it
come from? How is the best way to set it up?
For most retirees, the first source is Social
Security. You can take it as early as age 62
with a reduced benefit, at Full Retirement
Age (which is gradually increasing to age
67 over the next few years), or at age 70
where the benefit reaches its maximum.
The maximum monthly benefit in 2021 was
$3,895. The average benefit was $1,543. The
good news is that Social Security is adjusted for inflation. The
benefit is going up 5.9% for 2022.
Some retirees are still fortunate enough to have a traditional
pension, especially those that work for a government or large
corporation. Usually, one can choose a variety of ways to take
the benefit – single life (highest benefit, but ends at pensioner’s
death), or joint life (produces a lower benefit than single life,
but at death continues at usually 50% or 100% for the joint life).
Unfortunately, a pension benefit happens much less frequently
than it once did as it has been replaced by the popular 401k.
But for most retirees, these benefits are not enough regardless
of lifestyle. They turn to investments and savings. The more
conservative retiree may turn to an immediate annuity that
provides additional monthly income. To create a lifetime
benefit of $500 in monthly income a female age 65 needs
about $107,000 and a male age 65 only needs about $101,000.
Men do not live as long. You want to shop for those with a
very low or no commission as they will provide the highest
benefit. ALWAYS ask the financial adviser to provide in
writing the amount of commission they get for selling the
annuity. It shouldn’t be more than 3%. Don’t get one of those
expensive annuities from the TV shows or
dinner seminars because they are generally
loaded with commission cost.
Now what about the investment
portfolio? Most financial advisors talk about
a 4% withdrawal rate being a “safe” rate
and an appropriate one. Given the current
high value of both the stock and bond
markets, many are suggesting a smaller
percentage. Morningstar just completed
a white paper advocating 3.3%. Frankly,
there are a few variables to consider. The
younger the retiree, the lower the percentage
should be and the older retiree may be able
to withdraw more. Next, is health. Those
blessed with a longer life expectancy should
start at a lower rate than one with poor
health. A single male can probably draw more than a single
woman. The next is sequence of returns.
Retiring at a time when the market is going up, is certainly
going to provide comfort. You are withdrawing money and
the portfolio is increasing. Great! But what if you start with
a nice nest egg and the market goes the wrong way during
your early retirement? You could see your benefit drop 20%
or more. The average bear market lasts 9.6 months and the
recovery generally takes longer. How do you protect yourself?
One strategy to consider is keeping 18 months’ worth of living
expenses in cash or cash equivalent instruments. This money
along with dividends and interest can help avoid selling in
a down market for almost two years. Even if it lasts longer,
you can start selling bonds instead of stocks.
If you are headed into retirement or are already retired,
we can help you as we have thousands. Retirement planning
may be new to you, but not to us. To learn more about
retirement income strategies take advantage of our one-hour
complimentary consultation with NO obligation. We are
happy to meet you in either our Clearwater or Tampa office,
or it you prefer via Zoom.
/FormCRS_040121.pdf