Displaying items by tag: retirement
Model portfolios are seeing great inflows recently, but their popularity has created its own problems. The biggest of those problems—a dizzying proliferation of funds. Today we are going to make an off-the-cuff recommendation. How about a one-stop, no fee “model portfolio” for retirement. The model portfolio? Buy these four ETFs: the Vanguard Total Stock Market ETF (VTI), the Vanguard Total International Stock ETF (VXUS), the iShares Core Total USD Bond Market ETF (IUSB), and the Schwab US REIT ETF (SCHH).
FINSUM: This is in jest of course, but this is a dead simple and well-conceived set of ETFs for retirement.
When clients think about retiring early, Social Security benefits and their timing are often a critical consideration. However, what most don’t realize is that health insurance costs are often the biggest hindrance to retiring early. This means advisors have a crucial role to play in helping advisors plan for retirement healthcare costs. One of the main options for keeping costs lower is to use Obamacare (ACA insurance) for the period between retirement and Medicare eligibility. However, this takes significant planning, as the pricing for this is based on modified adjusted gross income (MAGI). The way MAGI is calculated includes some standard forms or income, but excludes others, such as Roth RIA contributions.
FINSUM: Advisors need to be careful in how to structure client income during this period of retirement as it can have a very material effect on insurance pricing and thus cost of living.
The annuities market is healthy and doing well. According to Ken Burger, national sales director for annuities at Luma, “When you look at our current market environment of minimal low fixed-income yields, high levels of volatility, and fears of mounting inflation, it’s easy to see the attractiveness of the annuity category”. The issue for advisors though is that annuities have long been a complicated and crowded space that is too complex and time-consuming for advisors. That is where Luma is trying to expand the market, as they have a slick annuities comparison tool that allows advisors to easily compare annuities side-by-side.
FINSUM:Annuities are a great fit for the current market given ultra-low rates and the huge mass of Americans who are retiring. Check out Luma.
Here is a tough fact for clients to accept: the major of retirees will need long-term care as they age. From an emotional perspective, that is difficult to expect. From a financial perspective, it is even worse. The average cost of long-term care is between $53,000 to $105,000 per year. This presents a major funding challenge for retirees.
FINSUM: Advisors need to help clients come to terms with this likelihood. Long-term care insurance is a good option for this situation. This usually costs between $1,375 to $3,600 a year for a 55 year-old man, and between $2,150 and $6,4000 for a 55 year-old woman.
Retirement costs are a major pitfall for advisors, if only because clients generally underestimate them! Nowhere is this more true than in regards to healthcare. Since healthcare costs tend to increasing very significantly as one ages, it is difficult for the average person to understand just how costly medical expenses can become when they get older. To make things more complicated, the situation is highly variable for each person. For example, in a married couple, do they enroll in Medicare at the same time or are they of different ages; does one spouse still work full-time and give healthcare access to other? There are also several financial products which can help in supporting these costs, such as HSAs and annuities, both of which can help offset the inevitable costs that arise even when covered by Medicare.
FINSUM: Retirement healthcare costs need to be a critical of advisors because they are generally poorly planned for by clients’ themselves.