After the rollercoaster we've experienced these past couple of years, and the down market we’re experiencing thus far in 2022, it’s natural to wonder if you’re doing as much as you can to protect your retirement nest egg from stock market volatility.

Even when the market falls during economic turbulence, you have more power than you realize. You just need to "Take Action" which frankly, is the opposite of "Stay the Course".  Let's face it.  Most people reach a point in their lives when the course no longer makes sense.  So how do we effectively make changes in our financial plan?  These five steps can help to keep you on track during uncertain economic times.

1. TRANSITION SOME SAVINGS OUT OF THE MARKET

Investing in the stock market always comes with a measure of risk. In exchange, over time you’re typically rewarded with higher returns than those you’d get from savings accounts, CDs, and other comparable accounts. But sometimes the market dips and your portfolio takes a hit.

The question many people have is, "should I get out when the market begins to decline?"  Not always and not everyone, but for a more mature investor- Yes. Absolutely. It is a very good move for you to make at least some of your money safe before and especially during a market decline.

If you are over-invested and carrying too much risk for your age, this could mean that you might not have enough time to recover from a major market decline before you need to use your savings.  For example, what would happen if a recession depleted a big chunk of your savings and then it took almost 10 years to recover as it did during The Great Recession of 2008? 

The Great Recession stands as a cautionary tale about risk, investing in only what you know, and the dangers of “staying the course”.  While the specific causes are still debated today, the culprits behind that economic collapse were a combination of several occurrences like:  

• the subprime mortgage market
• a swift increase in interest rates by the Federal Reserve 
• a credit crunch and the significant drop in bank lending
• risky Wall Street behavior
• toxic securities, packaged and repackaged, causing the value of the investments to nosedive

Unfortunately, in 2022 we are experiencing several of these occurrences again this year and without properly protecting your assets now, many of today’s retirees could find themselves in trouble.  A solid financial plan during market decline includes true diversification; as in, having some of your savings in a place where you absolutely can not lose it no matter how far the market falls.  
 
2. MAKE SURE YOU’RE REBALANCING
Throughout your life, you’ll want a mix of riskier assets for growth and safer assets for stability. The closer you get to retirement, the less risky you usually want to be. And, completely eliminating risk from at least some of your portfolio, is critical to today's retirees.

A good rule of thumb to follow, which is used throughout the financial industry is called The Rule of 100.   Take 100 and subtract your age. Whatever is leftover, is the amount of your portfolio that you could reasonably have at risk based on where you are at in your lifetime.   (Ex.  For a 60-year-old, you wouldn’t want to have more than 40% of your assets tied up in stocks, bonds, mutual funds, and other securities products which could lose value during market volatility.)

In addition to setting your mix of risky and safe assets and changing it as you get closer to retirement, you should also rebalance your At-Risk investments regularly. A long run of stock market returns can actually leave you taking more risk than you should if it isn't managed regularly.

3. GUARANTEE SOME PART OF YOUR RETIREMENT INCOME

Utilizing guaranteed income sources, which are not impacted by market volatility, like a lifetime income annuity can be a smart way to ride out a recession without serious losses. With this strategy, you will have a paycheck that you can count on each and every month, for the rest of your life, that won’t be impacted by the market. 

Pensions and Social Security are also examples of stable sources of retirement income. If you’re on the verge of retirement, consider keeping enough cash in a risk-free location — like a savings account — to cover a couple of years’ worth of expenses. Cash value in permanent life insurance, like an Indexed Universal Life policy, this can be another tool for you to use to fund a cash reserve. In a low-performing market, you’ll be able to tap that cash supply instead of selling investments at a loss. As an extra plus in this environment, it will also grow tax-free.

4. DIVERSIFY, DIVERSIFY, DIVERSIFY

Without “True Diversification” the market risk to your portfolio is going to be way too high; especially for a retiree.

The goal of diversification within your investments is to keep your portfolio healthy, regardless of what the market is doing. True Diversification however, involves placing a portion of your money in a place where you absolutely cannot lose it during times of poor performance but where it will still grow at a reasonable rate of return during times that the market is doing well.

A good tool for achieving True Diversification would be a Fixed Index Annuity.  These accounts grow based on certain indexes within the stock market, so you can experience the upswing of a positive market. But, they also lock in to protect your money during times of market decline so that you won’t lose money along the way.  It’s a safe vehicle for your savings to accumulate at a reasonable rate of return over time with no risk.

It is important to work with a Fixed Index Annuity specialist and not an investment advisor when trying to add this product to your portfolio. This will help to ensure you are receiving the right information and that your annuity is structured correctly to meet your needs. 

5. WORK WITH AN EXPERT, OR TWO!

Facing an uncertain market — especially as you close in on retirement — comes with high stakes.

A great financial advisor who specializes in securities and investments, will understand your financial goals and can guide you to investment options that help you build your savings over time.  But, if making more of your portfolio safe makes sense to you for the phase of life you are in, a securities and investment advisor won’t be as effective for you, since they specialize in balancing risk as you grow your nest egg. 

Especially if you are a more mature investor, you may need to seek the advice of a different kind of expert- a Safe Money Expert.  This would be someone who specializes in helping more mature clients transition from At-Risk strategies to strategies that will not only protect the savings you’ve already established but will help you utilize them to meet your future income needs as well. 

After all, a strong financial plan must include True Diversification if you are to properly prepare for the ups and downs of the market. That is how you safely weather a recession so that you can focus on what’s important; enjoying your retirement.

At Summerlin Benefits Consulting, we are Safe Money Experts.  We specialize in Fixed Index Annuities and other strategies to help more mature investors protect their assets during a time in your life when it makes the most sense to do so.  ​Call Today. Now is definitely the time to Take Action.

Women often experience some very specific retirement risks that could jeopardize their lifetime income. It’s time to spill the tea, on what today’s woman is facing in retirement and how best to plan for it.
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​When it comes to retirement, the strategy of saving early and saving often is good general advice for everyone. But that doesn’t mean the ins and outs of retirement will look the same for all. Personal circumstances and financial influencers can  define your specific needs for the future.  Women in particular face some challenges that can leave them at a disadvantage to men in retirement. For example, women’s average retirement income is about 80 percent of what men receive, according to the National Institute on Retirement Security. The good news is that knowing of challenges like this in advance will allow you to create a retirement income plan that caters to your future.  

Here are the top five factors that women need to consider when planning for retirement.
 
1. Women Live Longer 
Women who reach the typical retirement age of 65, are statistically prone to living for another 20 years or more while 65-year-old men’s average life expectancy is to live another 17 years. That means women need to save more over their lifetime to ensure they don’t outlive their retirement savings. 
 
The current average spending among households of age 65 or older is about $47,000 per year, according to the Bureau of Labor Statistics. Of course, how much you spend each year in retirement will depend on your personal lifestyle. Regardless, when planning for retirement female retirees in general may need to live off your savings longer than men will.  It’s important for you to have a strategy for making your income go further in life.  Thinking about ways to maximize your retirement income — including a plan for when to start taking Social Security is key.  

For people born in 1960 or later the full retirement age is now age 67 instead of age 65 and if you can wait until age 67 to begin taking Social Security payments, that is one way to help increase your retirement paychecks. You’re eligible to claim your benefits as early as 62, but claiming Social Security prior to age 67 will reduce your benefits by as much as 30 percent.  Many struggle with this decision however, because sometimes those paychecks are just simply “needed” sooner rather than later.

With Social Security being only one piece of the puzzle, knowing exactly how much you’ll need to save, what retirement income options are available to you, and how to draw from multiple income sources in a tax-efficient way are all important parts of your retirement plan. 
 
2. Women Are More Likely To Have Gaps In Their Retirement-Saving Years 
Contributing to the wage gap is the fact that women are still largely in charge of caregiving, and thus more likely to experience interruptions in their careers to raise children or care for other family members. In fact, one in three moms in a 2021 McKinsey & Company study considered scaling back at work or quitting their jobs entirely during the pandemic, largely due to childcare responsibilities.  

The problem is that time out of the workforce also means putting a pin in your retirement contributions — something that can cause female retirees to run out of money well before their end of life.  For women who are married, a spousal IRA may allow you and your spouse to keep up on retirement contributions while you take time off.  But for single women or women who were homemakers, a better option might be a lifetime income annuity.  This will enable you to take an asset you have already saved over the years, protect it, and purpose it into the role of providing you with monthly retirement paychecks for as long as you live.   
 
3. Women Have Higher Healthcare Costs 
Healthcare expenses are subject to inflation just like other cost of living requirements.  And unfortunately, cost of care does tend to be higher for people in retirement, regardless of gender. But because of their longer lifespans, women can expect to pay $200,000 more than men in health insurance premiums alone, according to an estimate by Health View Services.  

Additionally, retirees often face the expense of long term care needs.  Based on a recent cost of care survey conducted by John Hancock, for 2022 In Home Care for just 6 hours each day averages $4,464 per month, Assisted Living averages $4,805 per month, and Nursing Home averages $7,874 per month.  Now this can vary based on where you live and specific providers in your area but these general guidelines definitely illustrate how important it is for women, who are living longer, to make a plan for a lifetime income arrangement that will help cover costs like this no matter how long you live.
 
4. A ‘Gray Divorce’ Impacts Women More  
The divorce rate among Americans who are 50 and over has roughly doubled since the 1990s, according to Pew Research Center. And research has shown that getting divorced later in life is financially harder on women than men.  A 2020 Bowling Green State University study estimates that women see a 45 percent decrease in their standard of living following a gray divorce, versus 21 percent for men.  

The lower lifetime earnings of women compared with men and taking time out of the workforce to provide childcare are some of the reasons behind the gap.  And unfortunately, wives who have largely left financial decision-making to their husbands can be especially vulnerable. If you’re going through a divorce it would be a good idea to recalibrate your retirement plans with a professional and figure out what retirement income options you have.  

This is an area where a fixed index and/or lifetime income annuity can sometimes help but another example would be to take advantage of the Social Security Administration's ex-spouse benefits if eligible.  Did you know that if you were married for at least 10 years and your ex-spouse is eligible to begin collecting Social Security, you might be able to collect benefits on their record?  You could be entitled to an amount that’s equal to half of their benefit if you meet other criteria and haven’t remarried. 
 
5. Women May Be Impacted By The Lack Of Estate Planning 
Because women are likely to outlive their husbands, proper estate planning is key to ensuring their finances will be protected following the death of a spouse.  
 
A full estate plan includes not only creating a will or trust, but also includes naming powers of attorney and updating beneficiaries on life insurance policies, retirement accounts and other financial accounts. Keeping this information up to date is key because beneficiaries named in a policy override those named in a will. For instance, if a husband names an ex-spouse as a beneficiary on a life insurance policy but names his current wife in a will, the proceeds will go to the ex-spouse. 

It’s important to work with estate planning, tax and financial professionals when setting up an estate plan so they can help you and your spouse figure out how to best protect your assets and pass them on with tax efficiency in mind.  
 

Summerlin Benefits Consulting Inc. helps all of our clients avoid retirement risks that could affect their future income plans. In today's world however, as our female clients experience unique financial influences on your future, we want you to know that we are here for you.