Income Planning and Later Life Planning

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How do I spend my retirement assets?
What is a reasonable withdrawal rate?
How long will it last?
How can I gain the intellectual capital and asset allocation strategies of a pension fund?

These are some of the major questions addressed in the process of income planning, the first of three areas we focus on  when engaging in the process of later life planning with our clients. The primary goal of income planning is to provide a cash flow for a client that will last their lifetime. This is problematic in that we do not know when a client will die and so we do not know the time frame we are working with. Because we do not know the time frame we are working with we do not know the needed rate of return which means we do not know the level of risk we need to take and as such the asset allocation. Please take a look at our new interactive website devoted entirely to retirement and income planning.

 

Income planning is not only for older people it is also for disabled people. Income planning is especially important for people who have retired early or need to explore possible consequences of accepting an early retirement package.

With its focus on spending, income planning increases our focus on tax efficiency in the process of coming up with a spending plan. We may suggest a person work longer to get greater Social Security, pension or IRA payouts. We may have to vary the amounts being taking from accounts and/or change asset allocations and risk levels depending upon the fluidity of current equity and bond market conditions. Income planning also can increase the need for annuities and alternative investments as a way to provide guarantees and absolute return in difficult market environments.

A second area of focus in later life planning may be for a client to leave a legacy for loved ones and charities. But before one can leave a legacy or an estate we need to provide protection for those assets. While you were working, one of your primary risks was disability. In retirement some of the greatest risks are longevity risk, sequence of return risk, inflation risk and, as one gets older, and the risk of needing long-term care. So, in conjunction with legacy or estate planning we find it prudent to also focus on the third area of later life planning, the process of long-term care planning.

Many people are under the misperception that Medicare and other health insurance programs will cover the costs associated with providing care should one not be able to perform the physical functions necessary to live independently. These functions include bathing, dressing, eating, toileting, walking or wheeling, and transferring into and out of bed and chairs. Many people are also under the misperception and fear that if they need long-term care they will be placed in a nursing home away from family and friends. This is not true, most long-term care takes place in the home.

At FatTail Financial we support our clients and our client’s families in their effort to stay in supportive surroundings should they need long-term care. The best way to do this is to plan for the worst and hope for the best. Long-term care planning only enhances income planning and estate planning. It may include transferring this risk to an insurance company through the use of insurance and/or consulting with an elder law attorney for more personalized plannning.

 

We work with our retired clients to:

 

A) Provide an income to see them through retirement

B) Address tax issues when creating an income

C) Cover uncovered medical costs in retirement

D) Create and provide for a long-term care plan

E) Plan for incapacity

F) Create a legacy or estate plan

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