Over the past few weeks, there has been an incredible amount of commentary focused on the use of averages with respect to retirement income planning. If you haven’t been paying attention to what “financial guru” Dave Ramsey thinks about the 4% withdrawal rate, you might want to take a look.
One thing for certain, his assertion that someone who places 100% of their retirement funds into a stock portfolio with the expectation of an annual return of 12% is a bit aggressive. (Is this considered suitable for a retiree? I’ll leave that for you to answer.)
Over the past few weeks, there has been an incredible amount of commentary focused on the use of averages with respect to retirement income planning. If you haven’t been paying attention to what “financial guru” Dave Ramsey thinks about the 4% withdrawal rate, you might want to take a look.
One thing for certain, his assertion that someone who places 100% of their retirement funds into a stock portfolio with the expectation of an annual return of 12% is a bit aggressive. (Is this considered suitable for a retiree? I’ll leave that for you to answer.)
There is some similarity between the 4% withdrawal rate kerfuffle and long term care.
Let’s talk about assumptions. As you know, this is one of the areas that got long term care insurance in trouble in the first place – faulty assumptions.
One can make the argument that overly optimistic assumptions set up a future of disappointment, frustration, and regret while using a more prudent approach can provide stability, control, and present opportunities.
I am pretty certain that you would agree that a rising market is preferable to a falling market – particularly when we are talking about the distribution phase of our lives. And, in a falling market, every element of a plan/strategy needs to perform as expected in order to deliver on its promise.
As you may have heard – LONG TERM CARE IS AN INCOME PROBLEM which can directly impact every other phase of our lives and those around us. And, those retirement income plans that ignore this fact have an open door for disruption when an extended care situation occurs.
If statistics are right, according to The Office of the Assistant Secretary for Planning and Evaluation at the Department of Health & Human Services, “70% of adults who survive to age 65 develop severe LTSS needs before they die and 48% receive some paid care over their lifetime.” (LTSS = long term support & services)
Unfortunately, we cannot predict who that will impact or when. Which leads us down the path of retirement income planning (and protection).
An inflated performance assumption, when coupled with a down market, can be significant trouble. When you add a long term care event on top of that, you have a disaster.
The proof is in sequence of returns. OneAmerica speaks to this in the Efficient Long Term Care Risk Coverage for the Affluent report. Not only is the risk explained, but consequences are shared. This is is worth the read.
So, back to where we started, an aggressive assumption can quickly derail any plan (be it interest rate, or market performance, likelihood of a healthcare event, or something other). It is incumbent upon us, as financial professionals, to take a responsible and prudent approach with our clients’ retirement … including for the not so sunny days where positive performance abounds.
It is the end of the year which makes it an ideal time to review your book of business and identify your clients who are over 75 and own annuities that are on the sideline and earmarked for an emergency. The share the story how that money can be transformed into a tax-free long term care insurance strategy. That is what the million dollar annuity strategy is all about. Learn more about it at https://fridayswithfisher.com/million-dollar-annuity/.
My “big ask” of you for the million dollar annuity strategy is to identify 3 or 4 annuity owners 75 or older who might be viable candidates for our leverage strategy then give us a call.
Just a reminder, in our November Coffee Break, we talked about having “the conversation” and shared a few ideas that you might find to be helpful.
Fridays with Fisher 
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