Protect your retirement from inflation


Look who is 70

Sandwiched between the Greatest Generation and the baby boomers is the so-called Silent Generation. Those born between 1928 and 1945 entered the world at a time when the U.S. was recovering from the Great Depression and fighting a global war. Yet these luminaries are anything but silent. They are making themselves heard well into their seventh decade.
Barbara Streisand April 24, 1942 Brooklyn, NY
Though this Funny Lady has a great fear of performing live, she holds the record for the highest grossing single concert. Her show at the MGM Grand Garden Arena in December 1999 brough in $14.7 million.
Paul McCartney June 18, 1942 Liverpool, England
Sir Paul doesn’t have to sing for his supper anymore. He’s one of the wealthiest men in Britain. A High Court judgement recently tallied his total fortune at $602,597,160.
Harrison Ford July 13, 1942 Chicago
The “Raiders of the Lost Ark” star has some Washington connections: His Indiana Jones jacket and fedora are in the Smithsonian, and he went to high school with Hillary Clinton.
Tina Turner November 26, 1939 Nutbush, Tenn.
The seven-time Grammy winner’s real name is Ana Mae Bullock. When not touring, she lives in Zurich,Switzerland.
Roger Staubach Feb. 5, 1942 Cincinnati, Ohio
The U.S. Naval graduate and star college and pro football play, “Roger the Dodger” , is still running. He and Troy Aikman own a NASCAR racing team.

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12 Retirement Risks

1. Longevity risk- risk of outliving sustainable income.
2. U.S.Government programs risk- that government programs like Social Security/Medicare will not provide sufficient retirement income.
3. Excess withdrawal risk- risk of drawing down assets too quickly especially in first 5 years of retirement.
4. Market risk- risk of losing retirement assets temporarily or permanently because of market downturn or poor investment performance.
5. Lifestyle risk- risk there will not be sufficient income to maintain current or expected standard of living.
6.Asset allocation risk- risk of investing either too conservatively or too aggressively and not diversifying assets.
7.Sequence of returns risk- risk of receiving low or negative returns in early years and diminishing retirement portfolio.
8. Inflation risk- risk that rising costs will undermine purchasing power of retirement assets.
9.Medical expense risk- risk of paying for the growing costs of health care related services in retirement.
10.Tax risk- risk that rising taxes or unforseen taxes can have on portfolio or purchasing power.
11. Personal or event risk-(including spousal survivor risk)-risk that unexpected change in family circumstances may undermine anticipated retirement plans.
12.Incapacity risk- risk that as a result of deteriorating health, a retiree may not be able to excute sound judgement in managing retirement affairs.

If you believe that your retirement plan has one or more of the above risks, call Chuck Hoffmann for a free analysis and ways to reduce those risks.

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Inflationay Retirement Risk

In 1960, the median value of a home in the U.S. was $11,900. Today, some 50 years later, you’d be hard pressed to buy a decent car for that amount. And in 50 more years, you might find it impossible to buy a car for $170,000, which was the median sales price of a single-family home in the U.S. in 2010.

And that, my friends, is why inflation is one of the most insidious risks Americans will face in retirement. Yet witnessing these inflationary risks for the past 40 years, many Americans are not taking these adverse effects into account with their retirement accounts. Or at least says the Society of Actuaries, SOA in a recent study.

Compared to other planning activities, only 72% of pre-retirees and 55% of retirees are calculating the effects of inflation on their retirement planning. This highlights the need for individuals to better understand and manage inflation and longevity risks when planning for retirement.

The SOA 2000 Annuity Mortality Table states; That a couple age 65 has a 50% chance that one spouse will live beyond age 92 AND a 25% chance that at least one spouse will live beyond age 97!

Individuals always need to take inflation into consideration and now is the time to take action to address these inflation and longevity concerns by planning for multple scenarios.

When it comes to inflation every retiree should, for example, understand the basic fact that if annual inflation is 3% on average, in just 10 years a retiree will need to withdraw 30% more money. As an example, if an item costs $10 today, it will be $13 in 10 years and $18 in 20 years or 80% more!

As the U.S. Senate “Report to the Special Committee on Aging stated in June, 2011, “As the life expectancy of U.S. residents continues to increase, the risk that retirees will outlive their assets is a growing challenge. In addition to the risk of outliving their assets, the sharp declines in financial markets and home equity during the last few years and the continued increase in health-care costs have intensified workers’ concerns about having enough savings and how to best manage those savings in retirement.”

So here are a few ideas to consider on how to plan for inflation before and during retirement:

  • Delay Social Security, if possible until age 67 or 70. This will give you the highest possible guaranteed stream of income.
  • Consider working a year or two longer or part-time to save additional funds and or contribute to a $6000 Roth IRA.
  • Consider investing in common stocks and or mutual funds. Historically, over 50 years stocks have outperformed inflation. Still, those of us who can remember the past 12 years, know that many investors have lost 30-50% of their retirement funds due to losses in the stock market. All planners recommended a diversified portfolio with allocations in growth equities, bonds, muni’s, international, small cap, big cap, balanced, blended etc AND we still lost large portions of our IRA’s and 401k’s. Be very cautious in hoping the stock market will protect and grow your income over the next 30 years.
  • Consider investing in income annuities with inflation riders. Single Premium Immediate Annuities(SPIA) are like your personal “retirement paycheck” pension plan. You can roll your 401k and IRA accounts into a SPIA and add a 3-5% annual inflation guard to your guaranteed lifetime income stream and have no stock market risk and never out live your income.
  • Another annuity to consider investing in is a flexible Fixed Index Annuity(FIA) that has participation in the growth of the S&P 500 but with NEVER any losses to your principal. A guaranteed lifetime rider with the CPI inflation index will increase your guaranteed annual income from 1%-10% per year for up to 30 years.

Now that the U.S. Treasury and the Department of Labor have endorsed Annuities as a viable component of employer-sponsored retirement plans, all investors should consider transferring a portion of their stock market at risk retirement funds to an Annuity AND still have growth and guaranteed inflation adjusted Lifetime Income for both spouses.

If you believe your retirement nest egg needs a check-up and a long-term plan in order to avoid any short-term surprises, please contact me.

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With best compliments from Chuck Hoffmann, CSFP

Chuck Hoffmann starting helping educators to save money in tax deferred 403b accounts while a school teacher himself many years ago.

After seeing his clients prosper, he left teaching and formed his own financial planning company in San Francisco where he continued to help local business owners and professionals with their retirement planning, risk management and personal insurances.

Now, Chuck is helping pre-retirees and retirees on how best to safeguard their hard earned money. With clients living longer, good planning including safe guaranteed Fixed Index Annuities and or Index Life Insurance will provide 100% safety of principal, client’s retirement income will never decline due to stock market volatility and their retirement income can never be outlived by either spouse.

You can reach Chuck Hoffmann, CSFP at:
By Phone: 442-300-2095 or 415-509-5751
By Fax: 888-742-7383
By Email:
By Snail Mail: Creative Insurance Planning, 48511 Via Encanto, La Quints, Ca 92253

California Insurance License #0495169

These articles were written by Advisor Newsletter and distributed by the publisher to educate members of the community. They are not intended to provide tax or legal advice and should not be relied upon for such. They are summaries of our understanding and interpretation of some of the current laws and regulations and are not exhaustive. Investors should consult their legal or tax advisor for advice and information concerning their particular circumstances.
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