Mark Henry serves as the CEO and founder of Alloy Wealth, which helps people prepare for retirement and thrive in the years after their careers end. A respected voice in the finance world for years, Mark Henry started Alloy Wealth to share his expertise and ensure that people have the necessary tools available to them to plan appropriately for the last few decades of their lives. Possessing decades of experience in wealth management and retirement planning, Mr. Henry emphasizes that one of his biggest contributions to financial stability is the creation of a written retirement plan that can help clients to gain a holistic, big picture perspective on their finances.
Mark Henry and his team at Alloy Wealth work with numerous clients every month and have taken note of a number of recent topics that have been trending with those who are retired or nearing retirement age. The following are four of the most common ones.
1. Magic Number
Most people think that there is a magic number at which they can retire—an amount of savings or net worth that means they’ve made it and are ready to stop working. But the reality is that there is no one magic number. Instead, each person’s situation—and number—is different. Some people have saved millions or even tens of millions of dollars, and may think that they are well-equipped for retirement. But if that money is all in taxable accounts, they are going to lose a lot more to taxes than they probably realize when they actually withdraw it. At the same time, most people will seek to maintain the same lifestyle and budget that they had when they were working—and even $10 million doesn’t last forever if you are pulling $400,000 out every year. This is particularly true if there is debt on the property to be covered. On the other hand, people who have only $500,000 in savings—but in tax-advantaged accounts—may be able to live very comfortably if their house is paid off and they are used to living on a relatively modest income. The trick is to find the number that is specific to the individual—and then build a customized plan that guarantees stable, sustainable monthly income for the rest of their life.
2. Policy and Legislation Changes
Laws are continuously being passed to help out retirees, and one that a lot of people are talking about involves enhanced catch-up opportunities. These are essentially special opportunities to contribute more to retirement accounts than is typically allowed. But this is not always the best option for everyone. For instance, if a person already has 80 percent or 90 percent of their savings in retirement accounts that are not tax-advantaged, then the better option might be to start paying into a Roth IRA or other tax-protected growth account. Or, if a person is disciplined with their savings, they might instead choose to take more direct income each year, but move the excess into a brokerage account or other investment vehicle. The point here is that there’s no one-size-fits-all strategy when planning for retirement.
3. Healthcare and Retiring Before Age 65
Another popular topic is whether or not it’s possible to retire before turning 65 and qualifying for Medicare—or even retiring with Medicare, but dealing with concerns about longevity risk. The reality is that having access to Medicare does not automatically mean a person’s retirement is secure. Some people live longer than others. Some have more medical expenses than others. Either way, people need retirement plans that take all variables into account, including adjustment for inflation (and that includes medical care inflation, which can be as high as 12 percent to 15 percent), the chance that they might live to 95 or older, and tax-advantaged accounts that protect your funds while preparing for potential medical care costs.
4. Smarter Investments
Finally, everyone seems to be talking about “smarter investments.” People want safe, no-risk investments, but the reality is that all investments inherently involve risk. And this is actually necessary. Investments without risk typically don’t lead to any growth. But a good retirement plan needs to have three buckets. First, you need income for the short-term. But you must also focus on long-term growth, and that comes from having the bulk of your wealth in risk assets such as stocks. This ensures that a retiree’s nest egg doesn’t run out after a few years. Finally, it’s a good idea to have a mid-term growth bucket—one that has less risk than the long-term growth account, but that still has some potential upside. By putting all of these buckets together into a diversified, holistic retirement plan, certified financial planners and fiduciary advisors can aim to provide a stable, sustainable retirement for their clients.
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