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Helping a graying America avoid a retirement crisis

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By 2030, all baby boomers will be 65 or over, meaning 20 percent of the U.S. population is old enough to retire. For the first time in our nation’s history, there will be more people over the age of 65 than under age 18. Why is this news? With the country’s demographic shift peaking in about seven years, significant challenges face the country and individuals as market volatility, rising interest rates and inflation work against millions of retired Americans and those close to it. The big question is, Will your clients have enough money to retire as they move from asset accumulation to decumulation?

Grant Kvalheim, President of Athene, spoke with Mary Beth Franklin on the InvestmentNews’ podcast, Retirement Repair Shop, about the retirement crisis facing the country and how you can help your clients create a sound financial strategy.

In partnership with InvestmentNews

Hear more insights from Mary Beth Franklin and Grant Kvalheim’s conversation about America’s retirement crisis on Retirement Repair Shop.

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Shifting demographics and what it means

The American population is clearly graying as thousands of people reach retirement age every day. Not only is high inflation reducing purchasing power, but volatile markets are taking a toll on long-term savings. Soon, record numbers of retirees will be of age to receive Social Security benefits and Medicare, but will their nest egg be enough considering these other factors?

Even though pension plans have all but disappeared for most workers, the good news is people are taking up the slack. A majority (83 percent) of Americans are saving for their retirement, and nearly 50 million U.S. workers with access to an employer-sponsored retirement savings plan are participating.

The bad news: Only 55 percent of American workers know how much they’ll need in retirement, and over half of them are concerned about outliving their money.

“One thing people have to do is take charge of their retirement planning,” states Kvalheim. The fact that half of Americans who are saving haven’t figured out how much money they’ll need in retirement has to be addressed.”
‒ Grant Kvalheim, President of Athene

Addressing the big “if” in financial planning

Knowing how much money your client will need and for how long — that’s the big unknown question. More people living longer, healthier lives is a positive, but it also poses some financial concerns, such as outliving savings or knowing just when to move assets to fixed income … and how much.

Workers used to rely on a company pension plan for a guaranteed lifetime “paycheck.” With those rapidly declining, other products, such as a fixed indexed annuity (FIA), can help take their place, effectively replacing some of that guaranteed retirement income. Since the contract accumulates in value with reference to a benchmark index, without risking the principal to market loss, and it can generate income, a FIA may help provide certainty within many long-term savings strategies.

Assessing risk for the long-term

When considering financial security, especially as clients get closer to retirement, it can be hard to ignore volatile markets. It is important to help clients stay calm. Retirement at age 65 easily could last 30 years or more, in which case, sacrificing potential returns with an overly conservative approach could be a mistake.

Even in retirement, people still need to think as long-term investors and make adjustments as their risk tolerance changes.

“Everybody has to figure out what they’re comfortable with, but you can get greater returns if you still maintain some amount of equity exposure,” suggests Kvalheim. “Having a slice of guaranteed income in a traditional mix can provide longevity protection that neither fixed income nor equities have provided.”

Medicare may cost retirees more than they think

Today, 60 percent of a retirees’ income comes from Social Security and pensions. Future retirees without a pension will have to rely on their savings and investments for the money they’ll need to pay for everyday expenses, taxes, health insurance and out-of-pocket costs. It’s easy to plan for known expenses — such as housing, health insurance, taxes or food. But whether it’s health-related or helping an adult child start a business, life catches everyone off guard sometimes. The best way to manage the unexpected is to plan for it.

A common concern among retirees and pre-retirees is what will happen if Social Security rules change, Medicare means testing becomes more stringent or tax policy changes? With rising health care costs and Medicare premiums tied to retirement income, some people don’t think about the accumulated total they could spend over 30 years. It could add up to hundreds of thousands of dollars. “I think that’s the biggest miss for most people, and that’s something they have to plan for,” states Kvalheim.

Whether it’s means-tested premiums or out-of-pocket costs, health care can take a substantial bite out of retirement savings, and other future expenses may be a lot higher than people expect. That’s why having guaranteed income that can keep up with rising costs is so important. “More and more financial professionals and academicians recognize the need for a guaranteed income solution in a total financial plan and annuities can create lifetime guaranteed income,” states Kvalheim.

With your expertise, individuals can look at the big picture, consider their income sources and potential solutions. Despite changing demographics and economic challenges, front-line financial professionals are situated to help individuals create a sound income strategy and avoid their own retirement crisis.

This information is brought to you by Athene — where innovative annuity solutions are powered by unconventional thinking.