How Investors Can Maximize Retirement Income | The Smarter Investor


401K golden nest egg rising to the top.

Just 25 percent of baby boomers say they feel prepared for retirement or believe their savings will last through their retirement years.(Getty Images)

Baby boomers today continue grappling with a growing retirement income challenge – and the urgency is compounded by disappearing pension plans, higher costs of living, increasing health care costs and longer life expectancies.

Ten thousand baby boomers turn 65 each day. But according to the Insured Retirement Institute, just 25 percent feel prepared for retirement or believe their investments and savings will last through their retirement years.

The Nationwide Retirement Institute found that more than half of older adults will rely on their Social Security benefits as their main source of retirement income. Yet this study also shows that there are many misconceptions about maximizing Social Security benefits – and working with a financial advisor can help.

Timing matters. Many Americans may know that Social Security can help ensure that inflation does not erode the purchasing power of their benefits, by including a cost-of-living adjustment based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W. The Social Security Administration recently announced it will increase the Social Security benefit 2.8 percent in 2019 to help address climbing costs of living.

But what many Americans do not understand is how the timing of when they begin to take benefits can help them to maximize their Social Security income. While individuals can currently begin taking Social Security at age 62, waiting until full retirement age helps ensure they will begin receiving 100 percent of their benefits. Note that full retirement age is 66 in 2018 and will increase to age 66.5 in 2019.

More importantly, waiting until age 70 increases monthly income even more – potentially boosting Social Security payments as much as 76 percent. This is based on an analysis for individuals with full retirement age of 66, comparing their decision to file at age 62, when they would receive just 75 percent of their primary insurance amount, versus waiting to file until age 70, when they would receive a 132 percent of their primary insurance amount.

Advisors can help. Year over year, Nationwide Advisory Solutions’ Advisor Authority Study of more than 1,700 registered investment advisors, fee-based advisors and individual investors shows that saving for retirement is one of investors’ top three concerns – and one of their top three reasons for seeking financial advice.

And the benefits of working with an advisor are clear. The Nationwide Retirement Institute found that those who already work with a financial advisor collect at least 20 percent more of their Social Security benefits than those who do not. Yet these findings also show that only 13 percent of Americans 50 or older have a financial advisor who provides them advice on Social Security.

Baby boomers should consider how they can benefit from working with a financial advisor to maximize Social Security and learn about the right kinds of investment products to help supplement guaranteed income in retirement. The right advisor can help boomers understand the fundamentals of Social Security, interpret the many rules and simplify the complexities – such as determining eligibility, full retirement age and primary insurance amount, how to accumulate retirement credits, how other earning can impact Social Security benefits and how taxation can impact retirement income.

A recent poll by Nationwide Advisory Solutions found that in the 10 years since the 2008 financial crisis, registered investment advisors and fee-based advisors say investors are far more likely to seek guaranteed retirement income (64 percent) and guaranteed downside protection (62 percent) to hedge against market risks.

One simple and effective solution to address the many risks in retirement – from market risk, to inflation risk, to outliving retirement savings – is a single premium immediate annuity. These annuities can offer guaranteed income and a range of payout options – whether to bridge the income gap between when an investor retires and when they can claim full Social Security benefits, or to provide protected income for life.

Act now. The benefits are clear. To prepare for and live in retirement, it is critical to find an advisor and tap into their expertise. Whether you are afraid you will outlive your retirement savings, or a diligent saver looking to maximize retirement income, or a sophisticated investor looking to enjoy retirement to its fullest, a financial advisor is one of the best resources to help you make sense of it all.

An advisor will help you identify and define your financial goals to develop a comprehensive, customized and holistic plan. Working with an advisor who commits to a fiduciary standard, such as registered investment advisor or fee-based advisor, can ensure that the advice you receive is in your best interest.

And there is no reason to wait. There are advisors who can guide you at every stage of your financial lifecycle – from saving for your future, to winning the retirement income challenge, to leaving a legacy for your loved ones – while keeping you on track regardless of the market conditions or the economic cycle.

Craig Hawley, Contributor

Craig Hawley has been a contributor to The Smarter Investor blog since 2018. He has more than 2  Read moreCraig Hawley has been a contributor to The Smarter Investor blog since 2018. He has more than 20 years in the financial services industry and heads Nationwide Advisory Solutions, which focuses on serving RIAs, fee-based advisors and their clients. Previously, Craig served more than a decade as general counsel and secretary at Jefferson National. He also served as assistant general counsel at ARM Financial Group, a publicly traded insurance holding company with over $10 billion in assets. In addition, he was an associate at the law firm Wyatt, Tarrant & Combs in the corporate and securities group. Craig received a law degree and business management bachelor’s degree from the University of Louisville in Louisville, Kentucky. You can follow Craig on LinkedIn and Twitter.


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