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The Five Biggest Threats to a Secure Retirement

The Golden Years Turned Dark

Brought to you by

Gary L. Williams

CRD # 4699628

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Outliving Your Money: Golden Years urned Dark

How much money do you need to live comortably throughout your retirement

years? To answer that question, you need to know how long youll live. And that is a

tricky question to try and answer with any certainty!

The Five Biggest Threats to a Secure Retirement - Outliving Your Money

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In a white paper published by Allianz, Benartzi goes on to say that its dicult in a 40- or 45-yearworking career to accumulate the money needed or a 34-year, pre-paid retirement. And its evenmore challenging or a 65-year-old couple to accumulate enough.

As the lie expectancy o U.S. residents continues to increase, the risk that retirees will outlivetheir assets is a growing challenge. I a husband and wie are both at age 65, there is a 47 percentchance that at least one o them will live to age 90, and a 20 percent chance that one will live toage 95, according to the United States Government Accountability Oce.

In addition to the risk o outliving ones assets, the sharp declines in nancial markets and homeequity during the last ew years and the continued increase in health care costs have intensied

concerns about having enough savings and how to best manage those savings in retirement.

Fortunately, there are three things you can do to help make your money last and keep your re-tirement years golden: save smarter, match your liestyle to your resources, and invest prudently.

o illustrate the unique nancial complexities acing retirees, consider10 high school riends who decide to retire at age 65 Now, guess when therst o those 10 riends will die As it turns out, the rst death is likely tooccur only our years into retirement, at age 69 Next, try guessing whenthe last person will die Te answer is 34 years into retirement, at age 99!

~ Dr. Shlomo Benartzi, UCLA Professor

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1.Smarter Saving:

Saving more money is a critical piece to nancing your retirement years. But, i youre

already squeezing all the pennies out o your budget, where can you nd extra cash tocontinue building your nest egg? Below are a ew ideas:

Consider selling some o your stu. Ebay and other auction websites are great potentialoptions. While generating some extra cash to save, youll also be getting organized or the next

phase o your lie. You will also save your heirs rom the trouble o having to sort through years

o accumulated stu.

Automate your savings. Most Americans tend to spend the cash they have available.Thereore, the key to saving more is making sure the cash you want to put back or retirementis never available to spend in the rst place. The easiest way to do this is to set up automatic

savings deposits every month. Most banks and saving institutionsoer this as an option.

Review your insurance. I its been a couple oyears since youve shopped or insurance, you may wantto obtain new auto and homeowners insurance quotes. Iyoure not already bundling, consider doing so. I you dont

drive a lot o miles, tell the agent many ofer low mileagediscounts. This simple step could save you $100 a monthor more. Whatever you save dont spend it! This money isor investing.

Check your interest rates. I you have a home orauto loan, make sure you have the lowest interest ratesavailable. Interest rates are now at historicallows, so a renance may make sense.I you have high interest rate creditcards, transer to a card with azero percent oer or transerredbalances and then work to payit o as soon as possible.

Hopeully, by making a ew othese changes, youll be ableto save an extra $200 permonth or more. However,in addition, liestyle adjust-ments may also be needed.

Tree Proactive Strategies

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2. Lifestyle Adjustments:

To determine i liestyle adjustments are needed, you rst need to project how long your savingswill last. Do you need to live on investment interest alone? Can you aord to draw down yourprincipal savings? A good nancial planner can help you through this orecasting process. Dontorget to include the cost o infation in your calculations. For example, lets say you consistentlyearn a 5% return on your investments (over a 30-year period in retirement). However, infationaverages 3%. That means you no longer have access to 5% interest because you have to subtractthe 3% cost o infation. This leaves you 2% to work with.

Experts interviewed by the Government Accountability Oce (GAO)* recommend that retireesdelay receipt o Social Security benets until they reach at least ull retirement age. Expert alsorecommend retirees withdraw money rom their savings strategically and systematically. Many

Americans may need to scrutinize or limit their social activities and non-essential purchases.(GAO Retirement Income 6-2011)


Now, this doesnt mean that you stay home and live on Ramen Noodles! It means that you

have to be smart about nding ways to pay less or the things that matter most to you. For

example,

I you love dining out, watch or coupons or go out during happy hour. I youre ond o traveling, dont pay ull price or airare. Look or creative ways to

accumulate miles.

I you have two vehicles or two homes, consider downsizing to one and investingthe money you make on the sale.

I youre paying a lot or uel, consider a hybrid vehicle.

Another option is to consider a part-time job in a low-stress, high-enjoyment environment.

Work or a museum, art gallery or vineyard. Ofer music lessons, ski lessons, or tutoring. Iyoure artistic, consider selling your wares on etsy.com. Animal shelters, bookstores and cofee

shops also hire part-time employees and provide enjoyable work environments. These kinds

o opportunities can oten add joy to your lie, while adding a bit o extra income as well each

month.

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3. Prudent Investing:

Prudent investing is the most conusing o the three recommendations. Most advisors you talk

to will all into one o two camps. They will either recommend that you ollow Modern PortolioTheory* and build a truly diversied portolio. Or, they will recommend that you invest yoursavings into only xed or guaranteed accounts. Whats right or you? No one can really answerthat question without knowing all the actors that make up your unique situation, but in our

experience, its likely a combination o the two, as one-size-ts-all retirement plans rarely workout.

As you plan or how to invest or your retirement, its important to remember that interest ratesare now at an all-time low so sae investments will grow much slower than they have in the past.However, in most cases, retirees and near-retirees should avoid riskier investments in the quest

or higher returns.

While the stock market has established recognizable patterns over many years, it always hasbeen, and will always be, unpredictable. One o the undamentals o the market is that evenwhen it is troubled in the U.S., investment opportunities can still be positive in other countries when were not in the midst o a global economic crisis. I you rely on risk-based investments inretirement, you are essentially putting yoursel in the role o manager o a small pension und.Are you knowledgeable and competent enough to manage that und successully? Are youcondent in your advisors ability to do so?

Annuities oer a saer option. An annuity is a nancial product that helps you mitigate the risks o the

stock market. In many cases, annuities guarantee a certain level o income. The National Bureau oEconomic Research says, According to standard economic models, a risk-averse consumer who aces

uncertainty about length-o-lie should place a high value on lie annuities that provide guaranteed

income or lie.

The experts interviewed by the GAO also recommended that, Retirees enhance their guaranteed

income by purchasing an annuity with some limited portion o their savings. For people who want

higher levels o predictable income, an annuity can reduce the uncertainty that comes with managing

a portolio o investments and systematically drawing down income.

Considering the research conducted by the two credible organizations, a strong case can be made

or investing at least a portion o your savings into an annuity. However, there are many types o

annuities, and as with any type o investment account, there are good and bad uses or these tools.

An annuity can be a vital component o how you pay or the rest o your lie. However, it is not the

only solution or tool available.


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Guaranteeing Your Golden Years

Many people are rightully earul about the possibility

o outliving their money. As you contemplate this risk,

make sure to consider this three-prong approach: Save

Smarter, Adjust Your Liestyle and Invest Prudently. And,

dont implement any changes without rst getting ex-

pert advice. A trustworthy nancial advisor can be an

invaluable resource during these challenging times.

Find a partner to be your guide and sounding board

so that you can proceed with condence. With some

proactive planning, you can be sure that your golden

years dont become your darkest!


* Te US Government Accountability Oce (GAO) is an independent, nonpartisan agency that works orCongress Oen called the congressional watchdog, GAO investigates how the ederal government spendstaxpayer dollars Te GAO provides Congress (and the American People) with inormation that is timely,objective, act-based, nonpartisan, non-ideological, air, and balanced

** Te National Bureau o Economic Research (NBER) is the nations leading nonprot economic researchorganization wenty Nobel Prize winners in Economics and thirteen past chairs o the Presidents Councilo Economic Advisers have been researchers at the NBER Te more than 1,100 proessors o economicsand business now teaching at colleges and universities in North America who are NBER researchers are the

leading scholars in their elds Tese Bureau associates concentrate on our types o empirical research:developing new statistical measurements, estimating quantitative models o economic behavior, assessingthe economic efects o public policies, and projecting the efects o alternative policy proposals

Gary L. Williams, Financial Advisor169 Magnolia Point Drive, Columbia, SC 29212

p 888-746-0002 . 888-746-0002

membersnancial@bellsouthnet

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