It’s natural for people nearing retirement to have questions. Will they have enough money to maintain their desired lifestyle? What about things they can’t control, like inflation and long-term care expenses? Will they be able to try new and exciting activities? Local organizations are addressing the breadth of new concerns.
Baby boomers currently entering retirement are seeing greater longevity. With such a large generation retiring, many are changing their goals. Individuals are looking for ways to age successfully through exercise, diet, social engagement, and remaining active so they are not faced with increased illness and cognitive decline as they age.
Julie Kaminski, senior vice president and COO with Immanuel Communities, said the retirement living and senior care organization, which has served Nebraska and Iowa for more than 136 years, focuses on the changing needs of its residents.
“We are a mission-driven company that puts our residents, participants, and employees at the heart of all we do and our decision-making,” Kaminski said. “We have the financial strength that allows us to continually innovate and stay ahead of the changing market and demands of our field.”
Saving enough money for retirement has also become an issue.
“Saving for retirement can be challenging as the shift from government and employer-defined pensions to paying for housing and services as you age becomes a personal responsibility,” Kaminski said.
In June 2022, a study done by Edward Jones, Age Wave, and The Harris Poll found that in the past, retirees saw retirement as a time for rest and relaxation, but current retirees see retirement as a new chapter in their lives, a time to reinvent themselves and focus on new interests, skills and activities.
Kaminski said Immanuel residents are looking for more choices.
For example, many of the organization’s living communities do not offer three set meals a day at set times. Instead, residents have more menu choices and flexible dining times.
“We also see our residents wanting to engage in various activities,” Kaminski said. “[Although] bingo and cards are still popular, we have groups for residents interested in rock climbing, social drumming, yoga, tai chi, book clubs, and bocce ball. We are also seeing medical services such as clinics, physician visits and care navigation embedded into our communities. Coordination of care and access to care is an important feature to many retirees.”
Baby boomers bear a large part of the responsibility for these trends emerging now, according to Kaminski.
“The baby boomers are the largest group of retirees we have seen for quite some time, and they are cracking the mold on preconceived ideas around aging,” she said. “They want to be seen for who they are, and just because they are aging does not mean they will ascribe to society’s norms of how an aging individual should look, act, or think.
“I would advise individuals looking for retirement living to look for a place you feel welcomed and that you belong, where the people are friendly and there are a wide variety of amenities, activities and resident choice.
According to Rick J. Dhabalt, a financial advisor at DC Retirement Strategies, one of the biggest fears retirees have is running out of money.
“As advisers, we try to find the right products and solutions to help curb that fear and to make sure they don’t run out of money,” he said. “There are several products out there that can provide a lifetime stream of reliable income. We definitely discuss those options with them, especially because no one has a pension plan anymore — those are a thing of the past for most people. People just want a secure income when they retire.”
Thomas Pargett, a wealth advisor at Carson Group, said that investment strategies are unique to every individual or family. Ultimately, the firm ensures that its clients are covered for short-term needs of one to three years, medium-term needs of three to seven years, and long-term needs of more than seven years.
“The specific terms and the specific needs are discussed and understood through a comprehensive planning process that our clients go through with our advisers,” Pargett said. “Once the first seven years of needs are identified, we can really open the investment universe to our clients and ensure their money is invested in accordance with their specific financial plan.”
Some type of annuity product is generally used to create a reliable retirement income, according to Dhabalt.
“We see lots of our clients put a certain amount of assets in there, which covers their basic needs such as utilities, taxes, groceries, and gasoline,” he said. “For years we’ve promoted emergency funds to take care of those unexpected things that pop up in life.”
But the key to having a successful outcome is to start saving early, to have a financial plan in place and stick to the plan.
“Higher inflation and the cost of long-term care are unpredictable,” Dhabalt said. “If you have only so much money to go around you want to make sure you have reliable income to cover your basic daily needs.”
This is something that is answered through a detailed financial plan.
“Our advisers have the ability to create different scenarios with our clients, while they are right there in the room together, to show them how cash flow can be affected by such items as inflation and health care,” Pargett said. “There’s no universal answer to this question, but there are answers to each family. That’s exactly why our advisers are so detailed in delivering an ongoing financial plan.”
Stages in Investing
Individuals two decades away from retirement usually are not concerned with cash flow or income within their investment portfolio.
“At this stage, you really do have the ability to take more risk with growth-oriented investments — within your own personal risk tolerance of course — so that your investments can grow over the next 20 years,” Pargett said. “The timeframes (for short-term and medium-term planning) no longer belong in the planning conversation. It’s all about the long-term at this stage.”
Dhabalt generally advises clients nearing retirement that they lower their overall risk in their portfolio and place a higher allocation of their money into fixed-income strategies.
“One advantage of the rising interest rate environment that occurred in 2022 and a little bit in 2023 is that some of the lowest risk investments like money markets and certificates of deposit at the banks and credit unions have really nice high-interest rate earnings right now,” he said. “I haven’t seen interest rates like we have now in more than 20 years.”
For those who are retired, emergency funds and short-term, high-interest money market accounts, or short-duration certificates of deposit, are good strategies.
“We’re telling our folks to take advantage of that to reduce their overall risk as they get closer and closer to retirement,” Dhabalt said.
Stick to the Plan
“The most common question my team and I receive is ‘Am I going to be okay?’” Pargett said. “Individuals and families are truly most concerned with ensuring that the standard of living they seek is sustainable. Even those who are still a decade away from retiring are beginning to wonder if they’re on the right track to ensure they’re okay, and that’s completely normal and very common.”
A financial plan is a must to help you stay on track. The first part of that plan will create a road map that tells how you’re going to get to retirement, which involves making sure you’re saving enough and investing properly. The second part of that financial plan should be concerned with how to create income from the assets you’ve accumulated over your life.
“You’ve got to have a financial plan so that you at least have a blueprint of how you hope things turn out and to be able to generate enough income so you will never run out of money,” Dhabalt said.
It’s easy to deviate from your financial plan, especially when emotions get involved.
“You can get fearful pretty quickly when you turn on the news,” Dhabalt said. “But the clients who have a plan and stick to the plan are the ones who are in the best shape at the end of the day. Even as you get close to retirement and you’re in retirement, stick to the plan.”
Review and update your beneficiaries regularly. Develop an estate plan to make sure that everything’s in order. Meet with a trusted adviser to create that financial plan and review it annually to make sure that the plan is still good and that you’re sticking with it.
“The best time to start a financial plan was yesterday,” Pargett said. “There are so many things you can do to be proactive around your retirement, so the earlier the better. Is your estate plan prepared? Are you properly insured? Do you understand the best method for distribution in retirement? How does your planned distribution method affect your tax bracket? All of these questions should be answered and planned around before you officially retire and that’s what a Certified Financial Planner is built to do.”