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Preparing for retirement should create excitement, not concern. Yet for many, that’s not necessarily the case.
According to a recent study, 65% of pre-retirees do not have a plan for how much money they will spend each year in retirement and where that money will come from.1
That’s where we come in. We use insurance products, such as fixed annuities, and a variety of investment products to help you build financial strategies. From tax-efficient strategies to investment advice to protecting some of your assets — we’ll cover as many bases as possible to help you create a strategy that supports your retirement lifestyle and long-term financial goals.
At Nye Financial Group, we can offer you the following products and services;
Investment Planning & Portfolio Management by Nye Wealth Management
The traditional “withdraw 4% a year and your money should last” rule of thumb just doesn’t cut it anymore. Planning for retirement today is much more complicated and, for many, necessitates keeping some assets invested in securities, throughout retirement, in order to provide long-term inflation protection.
What happens simultaneously with taking withdrawals to satisfy your income needs? The answer is often described as a “double whammy,” when the account loses value due to distributions and a market decline. Not only can this plausible scenario take place, but it can also take place many times throughout your retirement. Mitigating the “double whammy” effect requires slowing down – slowing down the distributions and receiving less income or slowing down the market decline by selling out and locking in the losses. Neither of these actions should be part of a long-term retirement plan.
Nye Wealth Management subscribes to a multi-asset management style that preaches a “few eggs in all baskets” approach to investing. Specifically, Nye Wealth Management follows the teachings of Craig Israelsen, Ph.D., and his “7Twelve®” philosophy. Craig describes his asset management style as a “Diversified Investment Portfolio with a Plan.”
The “7Twelve®” philosophy seeks to:
- Produce long-term, equity-like returns with less volatility than an equities-only portfolio
- Minimize frequency and magnitude of losses (compared to an equities-only portfolio)
- Deliver more consistent performance than an equities-only portfolio over rolling three-year periods
- Maintain a consistent portfolio philosophy of broad diversification
- Promote prudent investment behavior by avoiding fads and performance chasing
- Each different mutual fund adds an important dimension to the portfolio because each fund has the potential to behave differently from other funds from year to year. Designing a low correlation portfolio is vitally important in meeting your long-term investment objectives.
- Rebalancing regularly is a vitally important element of any multi-asset class portfolio. Very simply, rebalancing is the process of bringing each separate component of the portfolio back to its allotted allocation.
Combined with a retirement income plan designed to minimize income risk, Nye Wealth Management’s approach to portfolio management can help retirees achieve a greater level of retirement security.
Retirement Income Planning
George Foreman once said, “The question isn’t at what age I want to retire, it’s at what income,” while Dr. Jeffrey Brown, a retirement expert and past advisor to the White House, is quoted as saying, “Income is the outcome,” when asked about retirement planning.
Rick Nye often tells his clients, “For those who are retiring today, it is not cash, but the abundance of cash flow, that’s king!”
The foundation of a great retirement plan is a rock-solid Retirement Income Plan, or RIP. It is the RIP that will lead you to that place we call a financially stress-free retirement. RIP is also an acronym for “rest in peace.” We believe that resting in peace (in retirement) is largely accomplished with contractual income that is both sufficient and diverse. Our definition of contractual income is simply this: income that continues for life, which is unaffected by market volatility and is provided to you by a dependable source. Sources of contractual income are pensions, Social Security and annuities.
The means justify the end where the “means” is plenty of contractual income and the “end” is a successfully planned retirement. A successful income plan, by definition, effectively coordinates all of your sources of contractual income, which is usually coupled with a prudent withdrawal schedule on your retirement account resources such as 401(k), IRA, 403(b) and nonqualified or after-tax accounts. Measuring success of the income plan is determined first by meeting your retirement income objectives each year while also taking steps to preserve these retirement resources for your future need for income.
A successful income plan is a customized plan built with your individual specifications in mind. To that end, every attempt is made to maximize your sources of contractual income such as pensions or Social Security benefits. If the planning process identifies a need for more contractual income, then another process begins. That process is to find the right annuity, in the right amount, for the right reasons, to fill that contractual income gap.
The income planning process must identify income risk. We define income risk as the percentage of your annual income target that is not provided by contractual income sources such as pensions, Social Security and lifetime annuity payments. (For example: If your annual retirement income is $80,000 and your contractual income sources provide $40,000, then your income risk is 50%).
Outliving our money is one of the greatest fears we all face in retirement. The best way to address this fear is with a sound income plan built to last as long as you do. Nye Financial Group & Nye Wealth Management can assist you in developing tax-efficient income and withdrawal strategies to minimize your taxable income while increasing your spendable income.
Annuities can be a great tool for diversifying your sources of contractual income or reducing your income risk in retirement. But it is important to select the right annuity for your specific situation, for the right reasons, and in the right amount. If you own an annuity, do you know what type? Is the cash value in your contract subject to market risk? What fees are you paying, and how will they impact your cash value once you start taking income? Do you know how it is designed to provide income or when and how to begin taking income? Will the income continue for your life only or will it continue for your spouse if you pass first? If you don’t own an annuity, how do you know if you should have one and what type? Nye Financial Group is well-versed in the complex world of annuities and is well-equipped to answer these questions.
Being completely independent, Nye Financial Group has access to hundreds of annuity products and well over 35 years of experience to evaluate your current annuity or to determine whether you should consider incorporating an annuity into your retirement plan.
If helping loved ones maintain a standard of living and avoid financial hardships after your passing is a priority for you, life insurance products can help. A general rule is that you may want to seek coverage between five and seven times your gross annual income. As far as the various types of policies go, they can generally be placed into one of two categories: term and permanent.
Term insurance generally provides coverage for a specified period of time and pays out a specified amount of coverage to your beneficiaries only if you die within that time period. A permanent insurance policy, on the other hand, also referred to as “cash value” insurance, will stay permanently in effect for the rest of your life, as long as premiums continue to be paid and the policy has enough value to cover the cost of the insurance.
Rising taxes may be a concern for anyone — especially for individuals approaching retirement. Having a solid strategy in place for how you will pay taxes on your retirement income can be an important component to living on a fixed income and avoiding surprises come tax time.
Investing in or purchasing a tax-deferred vehicle means your money can compound interest for years, without paying current income taxes, potentially allowing it to earn interest at a faster rate. Tax-deferred vehicles only allow you to defer paying income taxes until the money is withdrawn — presumably during retirement when you may be in a lower tax bracket. However, few financial vehicles avoid taxes altogether.
Because tax-deferred vehicles are generally designed to help individuals work toward specific long-term goals, there may be restrictions on when money can be withdrawn without penalty. Early withdrawals may be subject to charges and fees. Withdrawals prior to age 59 ½ may be subject to a 10% additional federal tax.
Our firm is not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. You should consult a legal or tax professional on any such matters.
Pensions Benefits Analysis & Planning
If you qualify for a traditional pension, there are many questions you need to have answered before you make your decision. Will the pension fund remain viable over the long term? Which benefit option should I choose? Should I take one of the many monthly benefit options or the lump sum? What are the trade-offs? Will my pension cause a reduction in my Social Security benefits or my spouse’s survivor benefit?
We assist and guide our clients in analyzing these critical decisions by carefully and thoroughly evaluating each one independently to determine how to optimize the result. Then we combine each decision into an overall income plan that illustrates how they interact and impact the life of your liquid assets.
Long-Term Care Planning
The longer we live, the more likely it is that we will eventually need assistance with our daily activities and care. Statistics show that 70% of Americans turning 65 will need some form of long-term care in their lifetime.1 For some, care will be provided at home. For others, it will mean assisted living or nursing home care. With nursing home costs averaging up to $90,155 a year2 for a semi-private room, and inflation that typically outpaces the general economy, future cost of care can be projected to reach much higher for an individual. Many mistakenly believe these costs will be covered by their health insurance or absorbed by Medicare. That is just not the case. Further, to qualify for Medicaid coverage, you must first spend down your liquid assets. Others believe the cost of covering this risk is too great or that the coverage purchased will fail to pay when it should. As with all aspects of retirement risk planning, it’s important to become informed and utilize the assistance of an experienced advisor to make the best decision possible.
Nye Financial Group can assist you and your family with long-term care planning. An important aspect of this planning is determining just how much of the risk should be transferred and by what means. The cost to transfer long-term care risk is directly tied to the age and health of the applicant. Therefore, the sooner you act, the more cost-efficient that transfer will be.
Preparing and planning for a long-term illness now will also alleviate the stress of having to someday spend down much, if not all, of your assets. While it’s a topic many prefer to avoid, it’s one on which you must at least get informed.
1 Genworth. "2019 Cost of Care Survey." www.genworth.com/aging-and-you/finances/cost-of-care. Accessed Sept. 14, 2020.
Legacy & Estate Planning
Planning how to properly protect, preserve and pass along your estate to your heirs is one of the most vital components of your overall financial well-being and should be incorporated in your retirement planning process.
Whether you are trying to minimize the impact of taxes or simply guarantee your heirs will receive what you originally planned, Nye Financial Group will work with you and your attorney to help develop a customized strategy to meet your long- term goals and needs. If you do not have an estate planning attorney, we would be happy to provide a referral to one with the appropriate level of experience given your specific situation.
We can also refer you to professionals who provide the following services:
Probate is the potentially lengthy and costly court process by which a will is proved either valid or invalid.
With changes in the tax environment, there may be compelling reasons to integrate philanthropy into your financial and estate planning.
Estate planning is simply determining (while you’re still alive) where your assets should go after you die.
Paying taxes is part of our patriotic duty, but no one wants to pay more than their fair share.
Once we understand your financial situation, risk tolerance and investment objectives, we can help you decide which types of products and services fit within your financial strategy.
1 Greenwald & Associates. Society of Actuaries. May 2020. “2019 Risks and Process of Retirement Survey.” https://www.soa.org/globalassets/assets/files/resources/research-report/2020/2019-risks-process-retirement-survey.pdfk-report-final.pdf.
Accessed Sept. 14, 2020.
Social Security Benefits Analysis & Planning
Social Security tells us that more than 70% of those claiming their benefits today are claiming them before their full retirement age. For some, claiming early is the right thing to do, but for others it ends up being a huge mistake. There is no one-size-fits-all to claiming your Social Security benefits. From a practical standpoint, you will claim your Social Security benefits one time. As with any decision you make only once, you don’t have the luxury of practice. Therefore, the decision should be informed with all your questions answered before you file and elect your benefits.
The most important question is the one you should ask yourself: Do I have a retirement planning resource equipped to help me make the right decision with my Social Security benefits? If so, that resource should be able to advise you on when you should draw benefits in light of an overall retirement income plan. Which claiming strategy is right for me? Can I leverage a customized claiming strategy to generate greater lifetime benefits for me and my spouse, should my spouse survive me? Counterintuitively, will I receive more in lifetime benefits if I delay my decision past my full retirement date?