Planning for a Confident Retirement

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Jeffrey M. Stark, CFP® is a Financial Advisor with LPL Financial.  His office is located in Lafayette, California in the San Francisco Bay Area.

Jeff’s goal is to help his clients in every aspect of their financial lives, especially working toward a comfortable and secure retirement.

Historically, the financial services industry has been focused on the important task of helping clients accumulate a nest egg of assets for retirement.

However, as you approach retirement or are already retired there are significant additional concerns that need your immediate attention.  First and foremost is the increasingly complex challenge of planning an income stream that will last throughout your lifetime and allow you to maintain your desired standard of living.

  • How do you avoid making the biggest mistake of your life - which is running out of money?
  • How do you turn the wealth you’ve created into a lifetime income that needs to last for an unknown period of time? 
  • How do you reliably replace your paycheck given the uncertainties of the financial markets? 

It’s Not “How Much”, but “How Long?”

When you retire, the question is no longer “how much” money you’ve accumulated, but “how long” your money will last.  You need to employ different thinking in managing your assets in retirement.  Investment strategies that might have worked well for asset accumulation may not work for lifetime income distribution.  Some of the important questions that need to be answered are:


What worries you most about your retirement?

Will you be able to maintain your standard of living throughout retirement?

Will you outlive your money?

What considerations do you need to factor in when planning a lifetime income strategy?

How can you feel more secure and confident about your retirement?


Retirement portfolios are particularly sensitive to market losses.  During your working years portfolio losses can be made up by additional deposits, which can work to your favor by buying in at lower prices.  Also, losses can be potentially made up by allowing enough time for the market to recover.  But when you’re retired, you don’t have years to wait for the market to come back.  You are constantly withdrawing income.  Market losses, in addition to regular withdrawals, might lead to an early and rapid depletion of your portfolio.

You need a distinct Retirement Income Planning Strategy.

Six Major Retirement Risks

There are six major risks that could jeopardize your retirement if not properly anticipated, prepared for, and constantly monitored.

Longevity Risk

  • You may be retired, even longer than you worked
  • Longer retirement horizons of 25-30 years mean that your money must last longer.
  • Living longer, costs more; and raises the risk of outliving your money.
  • Healthier lifestyles, advances in medicines and technology have extended lives.
  • Most people underestimate how long they will live by several years.
  • Financial planning industry commonly uses age 90, or longer, in their planning assumptions.

Inflation Risk

  • Every year, life gets more expensive.  Plan on it.
  • During your working years the impact of higher costs may be disguised or offset by increased employment income without much notice or consequence.
  • However, during retirement, rising costs may become much more visible and impactful, if your income doesn't keep up with the cost of living.
  • Even a modest 3% inflation rate can cut the purchasing power of your money in half during your lifetime!
  • Imagine living on half of your current income.  What would that do to your standard of living?  To your enjoyment of life?  What would you be forced to give up?

Market Risk

  • Asset Allocation Risk.  Being too conservative may expose you to a greater risk of outliving your assets.  You still need to grow your assets in retirement.
  • Risk of Principal Loss.  Portfolio losses diminish the earning power of the remaining assets.  A smaller asset base produces less income.
  • Sequence-of-Return Risk.  This is the order in which positive and negative market returns occur over which you have no control.  A big market loss or series of moderate losses early in retirement can dramatically shorten the life span of your portfolio.
  • You can have a good plan, but still have the misfortune to experience a market decline just as you retire.
  • Behavioral Risk.  The common emotions of fear during steep market declines and overconfidence during market rallies often lead to poor investment decisions.  At times, emotions can overwhelm reason, and behavioral risk can override years of thoughtful planning.
  • Your investment strategy needs be designed in such a way that allows you to stay invested through all types of market environments without triggering the emotions that can work against you.

Withdrawal Risk

  • Withdrawal Rate Risk.  The rate at which you withdraw income from your portfolio and the market trend at the time can dramatically affect how long your money will last.
  • Withdrawing too much too soon can shorten the life of the portfolio.  Withdrawing too little may needlessly reduce your standard of living and your enjoyment of life.
  • Market Trend Risk.  A generally rising market may help preserve your assets as portfolio growth may make up for withdrawals.  However, a generally declining market can compound the losses as income is withdrawn from a shrinking asset base, likely shortening the life of the portfolio.
  • Determining the "safe and sustainable" withdrawal rate through all market environments is essential, so that you don't run out of money in later years.
  • Even the savviest asset allocation strategy can misfire without an equally wise strategy for withdrawing your assets.

Healthcare Expense Risk

  • The cost of healthcare is one of the biggest financial issues facing Americans today.
  • Total Price Tag A study by Fidelity Investments estimates that a 65-year old couple retiring in 2013 will need approximately $220,000 to cover medical expenses in retirement which are not covered by Medicare, such as copayments, deductibles, and over-the-counter drugs.1
  • Costs increase, the longer you live.  Ironically, the healthier you are, potentially the greater the cost you incur, as more services are needed later in life.  Uncovered medical expenses over a 30-year retirement for a couple may reach $315,000.1
  • People significantly underestimate total costs.  In a recent poll of pre-retirees Fidelity found that almost half of the respondents estimated that only $50,000 was needed.2
  • Healthcare costs and premiums have risen at more than twice the rate of inflation.3
  • These estimates do not include the cost of long-term care.
  • Long-Term Care Risk is one of the greatest financial liabilities for most retirees.  Long-term care expenses can wipe out years of accumulation in a short period of time, and decimate the most carefully planned retirement, if there is no contingency plan in place.
  • The individual, whether a husband or wife, father or mother, doesn't have the long-term care eventThe family does!  It can impact every family member financially and emotionally as well as their personal health and family relationships.
  • So significant is the financial risk posed by healthcare expenses that developing a funding plan, or identifying specific assets or a dedicated income stream to cover these costs has become an essential element in working towards a secure retirement.

Fidelity Benefits Consulting, "America's Lifetime Income Challenge", 2013
Fidelity-sponsored HSA Survey, 2013
3 Fidelity Investments, "How to tame health care costs when you retire", 2012


  • As the Baby Boomer generation retires, Federal, state and local governments may need to raise more tax revenue to cover the increasing costs of Medicare, Medicaid, Social Security, and unfunded retiree pension and health insurance liabilities.
  • Higher taxes leave less income to cover living expenses and may lead to tapping into principal to maintain your standard of living.
  • A strategy to minimize taxes is one way to potentially maximize retirement assets.

Unexpected Life Events

  • Widowhood
  • Chronic medical condition
  • Aging parents
  • Boomerang kids
  • Raising grandkids
  • Divorce late in life
  • Forced retirement

Other Important Issues

Social Security Claiming Strategy

  • A key element to lifetime income planning is when and how to take your benefits.
  • The decision can be tailored to your goals and circumstances.  No standard right and wrong answer.
  • It is important to avoid the four costly mistakes that most retirees make.
  • I can analyze the various options and trade-offs to help you choose the most suitable strategy to maximize the income benefits for you and your family.

Consolidating Retirement Accounts

  • 401(k) decision whether to keep your qualified plan or roll it over to an IRA.
  • Understanding the use of Traditional IRAs, Roth IRAs, and Stretch IRAs.
  • Understanding the investment and planning flexibility of using your own IRA.
  • Developing the proper strategy for Required Minimum Distributions (RMD's)

Leaving a Legacy

  • What is the best way to pass on your wealth and your values to your children and grandchildren?
  • How do you want to be remembered?  What's important to you?
  • I can help in the initial discussion and evaluation of simple and more sophisticated techniques and work with your legal advisors to implement a proper plan.

The Retirement Planning Puzzle

Retirement planning is like trying to solve a very complicated jigsaw puzzle with multiple interlocking pieces.  It can be quite a process.  To start, you have all the pieces spread out in front of you on the table, all the important information: your goals, needs, assets, and resources, etc.

The goal is to assemble the puzzle pieces to match the picture of your retirement on the cover of the box.  But sometimes that picture isn't so clear.  Maybe it hasn't been thought-through completely yet.  What does retirement actually look like for you?  What do you see yourself doing?  How much does that cost?  Where's the money going to come from to cover those expenses?

Sometimes the pieces are just difficult to figure out how they fit together.  How do you account for impact of the major risks and uncertainties that could jeopardize your retirement?

How do you develop a comprehensive strategy to make sure that what you envision is realized?

These are very complicated issues that require careful thought and analysis.  You only get one chance to get it right.  There are no "do-overs". 

How well you retire tomorrow, depends on how well you plan today.

I can help you think through these issues and determine your most suitable course of action, so that when you're ready to retire, you'll know where you stand on day one and all the days to come.

If you would like to receive a copy of the very informative brochure "Planning for Income to Last" from Fidelity Investments, or to request a free consultation, please click HERE.

"My Goal is to Help You Grow, Protect, and Sustain the Retirement Lifestyle You Want."