Category: Travel

Even the “rich” can’t afford retirement.

Investment Approach

Registered Investment Advisors (RIAs) deal with people at all wealth levels but most are upper income even if they are not billionaires.  There is a retirement crisis and it’s not just hitting the working class.

The typical median wage earner making $50,000 a year and retiring at 67 can expect Social Security to pay him and his wife about $2400 per month.  To maintain their previous spending levels this leaves a gap of about $1000 a month that has to be made up from savings. But many of these middle income people have not saved for their retirement.  Which means working longer or reducing their lifestyle.

This problem is also hitting the higher income people.  How well is the person earning over $200,000 a year going to do in retirement?  The issues that even these so-called “rich” face are the same:  increased longevity, medical care, debts and an expensive lifestyle are all issues that have to be considered.

“The $200,000+ executive expects a fine house, two cars, two holidays a year, private schools, to pay for his kid’s university tuition, and so it goes on. And this is not to mention the tax bill he’s paying on his earned income. A bunch of all this was really debt-funded, so effectively the executive spent chunks of his retirement money during his working days.”

When high income people are working, they usually don’t watch their pennies or budget.  But once retired, that salary stops.  That’s when savings are required to bridge the gap between their lifestyle and income from Social Security and (if they’re lucky) pension payments.  At that point the need for advance planning becomes important.

Before the retirement date is set, the affluent need to create a retirement plan.  He or she needs to know what their basic income needs are; the cost of utilities, food, clothing, insurance, transportation and other basic needs.  Once the basics are determined, they can plan for their “wants.”  This includes things such as replacing cars, the cost of vacation travel, charitable gifts, club dues, and all the other expenses that are lifestyle issues.  Finally, there are “wishes” which may include a vacation home, a boat, a wedding, a legacy.  The list can be a long one but it should be part of a financial plan.

If the plan tells us that the chances of success are low, we can move out our retirement date, increase our savings rate or reduce our retirement spending plans.

This kind of planning will reduce the anxiety that is typically associated with the retirement decision making.

It’s about making people’s lives better

It’s not just about money.

In most people’s minds the term “financial advisor” has all the emphasis on “financial” and very little about “advisor.” We disagree. We think of ourselves as advisors to the family, helping guide families with a whole range of issues. Some don’t have anything to do with investing.

We have gone car shopping for a client who didn’t want to deal with car salesmen. We have helped people choose the right retirement community.  We help educate young people about investing to make sure they get a good start in life.  We explore vacation destinations for our clients. We review our clients’ estate plans and beneficiary designations to make sure that they are in line with their wishes. We wrote a book designed to help people provide critical information to their heirs before they pass on (Before I Go).

And, of course, we have provided peace of mind to clients who worried about running out of money in their retirement years. This allowed them to do the things they wanted such as travel, spend time with their grandchildren or just relax with a good book.

We do more than manage portfolios. We assist the people who come to us for advice with the deeply personal things in their lives. Making people’s lives better is our goal.

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Tips for snowbirds

“Snowbirds” are those retired couples who live in more than one state.  Usually they live in northern climates in the summer and move to warmer places like Florida or Arizona in the winter months.

From the Wall Street Journal

By the time Gil Stanley retired from teaching in 2009, he’d had enough of the harsh winters in his hometown of York Harbor, Maine. So the now-72-year-old built a home in Florida where he spends about half the year.
But getting his financial life in tune with this new lifestyle was no easy task.

What are some of the issues for people who want to become snowbirds?

  • Make sure you have access to your bank and investment accounts.
  • Decide what state you choose as your primary residence.  Different states have different rules.  Your decision can make a big difference in the taxes you owe.
  • Get professional tax advice.
  • Check with your financial advisor to make sure you can afford it.
  • Use the Internet.  Look into electronic bill payment and billing statements.
  • Be sure to notify vendors and financial advisers of changes of address.  Returned mail can block access to accounts.
  • Check your auto, home and health insurance to make sure you remain covered.
  • Check on health care providers to make sure that you have access when you need it.
  • Arrange for someone to check on you vacant home.

As the Baby Boom generation moves into retirement, many will take advantage of increased longevity to remain active.  Many will become snowbirds or hit the road with their RV, doing the things they have put off while working.    Planning ahead is critical for this to succeed.

© 2021 Korving & Company, LLC