As people are living longer, traditional retirement planning is evolving into longevity planning. This new approach requires a holistic perspective that considers the individual, family, and societal factors to ensure long-term financial security and quality of life.

Longevity planning extends beyond traditional financial management. Transitioning from a regular income to relying on savings and investments can be daunting. However, with strategic planning and professional guidance, you can make your money last longer and enjoy a secure retirement. 

Here’s how to manage your finances effectively in retirement and how CKS Summit Group can help you achieve your retirement goals.

The Importance of a Lasting Retirement Income

With rising life expectancy rates, having a reliable source of income in retirement has become increasingly important. According to the CDC, the average life expectancy in the United States is around 78.7 years, and it’s not uncommon for many to live well into their 80s and 90s. This extended lifespan requires careful financial planning to help ensure that savings and investments can support a comfortable lifestyle well into your golden years.

Financial experts often suggest having savings that can replace 70-80% of pre-retirement income to help maintain a comfortable retirement. This translates into an estimated need of at least $1 million for many individuals. Let’s take a look at 

1. Understanding Your Retirement Needs

The first step in making your money last is understanding your financial needs in retirement. According to the U.S. Bureau of Labor Statistics, the average retired household spends about $50,220 annually. However, this number can vary widely depending on lifestyle, healthcare needs, and geographic location. It’s crucial to account for inflation as living costs increase over time. 

Inflation erodes the purchasing power of your savings, making it more expensive to maintain the same standard of living. Even modest inflation rates can accumulate significantly throughout a long retirement. For example, an annual inflation rate of just 2% can lead to a 22% increase in living costs over ten years. At CKS Summit Group, our team helps clients set realistic financial goals and develop strategies to meet them, so that retirees can enjoy a comfortable lifestyle throughout their golden years.

2. Diversifying Your Income Sources 

Relying solely on one income source, such as Social Security, may not be sufficient to cover all your retirement expenses. According to the Social Security Administration, Social Security benefits replace only about 40% of an average wage earner’s pre-retirement income. This diversification not only spreads risk but also enhances financial resilience, ensuring that you have multiple streams of income to support your lifestyle. 

Here are several ways to diversify your income in retirement:

• Annuities: Annuities are financial products that can provide a guaranteed income stream, often for life. They come in various forms, including fixed, variable, and indexed annuities, each with different risk levels and income potentials. Annuities can be an excellent option for those looking to ensure a steady cash flow during retirement.
• Rental Income: Investing in real estate can be valuable for generating passive income. Rental properties can provide regular income and potential appreciation in property value. However, it’s crucial to consider the responsibilities and costs associated with property management and maintenance.
• Investment Portfolios: A well-diversified investment portfolio with stocks, bonds, mutual funds, and other securities can offer growth and income potential. The key is to balance the portfolio according to your risk tolerance and retirement timeline, shifting towards more conservative investments as you age to preserve capital.
• Dividend Stocks: Investing in dividend stocks can provide a regular income stream and potential capital gains. Dividends are typically paid quarterly and can be reinvested or used as cash income.
• Bonds and Fixed Income Securities: These assets offer a stable income through regular interest payments. They are generally less risky than stocks and can provide a predictable income stream, which is particularly beneficial in retirement.

3. Managing Healthcare Costs

Healthcare is often one of the largest expenses in retirement. Healthcare costs have been increasing at one-and-a-half to two times the inflation rate. Today, a 55-year-old couple can expect to pay more than $1 million in healthcare costs during retirement. This staggering figure underscores the importance of preparing for healthcare costs, encompassing a wide range of potential expenses. Here are some key care costs to consider in retirement:

• Insurance Premiums: These include Medicare Part B, Part D, and any supplemental insurance plans (Medigap) that cover additional expenses. Choosing the right Medicare plan can significantly impact out-of-pocket costs and access to necessary medical services.
• Out-of-Pocket Expenses: Even with insurance, retirees often face considerable out-of-pocket expenses for services like copayments, deductibles, and coinsurance. Prescription drugs, dental care, vision services, and hearing aids are other common expenses Medicare does not cover fully.
• Long-Term Care: Long-term care, which includes nursing home care, assisted living, and in-home care, is not covered by standard health insurance or Medicare. Roughly 70% of those 65 and older will eventually require long-term care services. Having a plan to cover these expenses is crucial.

Working with a trusted advisor can help guide you through the intricacies of healthcare planning. CKS Summit Group can help you integrate healthcare expenses into your retirement plan.

4. Implementing a Withdrawal Strategy

How and when you withdraw money from your retirement accounts can significantly impact the longevity of your savings. An effective withdrawal strategy balances the need for income with preserving your investment principal. Research suggests that a monthly withdrawal rate of 4% is often recommended to ensure that your savings last for a 30-year retirement. 

CKS Summit Group has decades of experience creating withdrawal strategies that minimize tax implications and optimize your retirement income. This includes considering factors like required minimum distributions (RMDs) and the sequence of withdrawals from taxable and tax-advantaged accounts.

5. Adjusting Your Lifestyle

Sometimes, minor adjustments to your lifestyle can significantly impact your financial longevity. This might include downsizing your home, reducing discretionary spending, or relocating to a more affordable area. 39% of baby boomers consider downsizing to reduce expenses and simplify their lives. CKS Summit Group can help you assess various lifestyle choices and their financial implications, empowering you to make informed decisions that help enhance your retirement experience without compromising your financial security.

6. Regular Financial Reviews

Retirement planning is not a one-time event; it requires regular reviews and adjustments. Market conditions, personal circumstances, and legislation changes can affect your financial plan. CKS Summit provides ongoing financial reviews to help ensure your plan remains aligned with your goals. Their proactive approach helps you navigate changes and adjust your strategies as needed, keeping you on track for a secure retirement.

How CKS Summit Group Can Help

At CKS Summit Group, we understand the complexities of retirement planning and are committed to confidently helping you achieve your financial goals. Our financial advisors can help you create a comprehensive financial plan tailored to your unique needs and goals in retirement. Whether you’re looking to maximize your savings, optimize investment strategies, or navigate the complexities of healthcare costs and inflation, our team guides you every step of the way.

Contact CKS Summit today to learn how they can help you make your money last longer in retirement and achieve financial peace of mind.