The year 2011 was the advent of the retirement crisis in America. As we move forward into 2012 and the next several years, an unprecedented number of Americans will enter into retirement, 79 million to be exact. However, the majority of them are financially ill-prepared for retirement. Baby boomers face numerous retirement income challenges, many of which are unique to their generation.
As this generation enters retirement, we are seeing growing uncertainty among the sources of retirement income that have traditionally been heavily relied upon by retirees, such as Social Security. On top of that healthcare costs continue to increase and will continue increasing in the coming years. The life expectancy of baby boomers exceeds that of previous generations and in turn they will be spending more time in retirement than previous retirees, thus requiring retirement savings to last over a longer period of time.
Still many Americans nearing retirement plan on Social Security providing for a majority of their income throughout retirement. More than four out of 10 baby boomers cited Social Security as a major source of retirement income with 51 percent of older boomers anticipating it to make up a significant portion of their retirement income.
Rising Healthcare Costs
Once these steps have been taken you and your client are able to best figure out which strategies are the best choice to help your client achieve their retirement goals and maintain financial stability throughout retirement. IRI’s retirement income guide, Building Your Future, explains three different retirement income strategies: investment and income planning strategies, insured income products and income-producing investment products.
Investment and income planning strategies are used with the underlying investments. This strategy includes a number of different approaches including systematic withdrawal plans (SWPs), the bucket approach, the risk-adjusted total return approach, the income floor/hybrid approach, bond ladders, laddering a CD portfolio and reverse mortgages. The majority of these approaches generate cash flow through a combination of high- and low-risk investments in a highly diversified portfolio.