Happiness In Retirement

Happiness In Retirement

I spent some time over this past weekend tossing the tennis ball to our French bulldog, Louie.  Heck, as most of you know, I live in a house of all women.  So it is only appropriate that my girls name him after some famous French guy, Louie Vuitton. Louie’s a good guy, during this pandemic Louie and I have become very close.  He never tires of this game of fetch and I often have to stop the game before his legs get over-tired because he doesn’t know when enough is enough. For him, it’s truly a dog’s life. He’s completely happy to run after the ball again and again. You know, sometimes I envy that happiness because it’s so simple and pure. 

As Louie and I played, I got thinking.  I got thinking about all the folks Jen and I serve as they prepare for or are currently in retirement. You see, one of the things we do as we build out a sound retirement system is to help provide that peace of mind for folks preparing, entering or in retirement. To plan for a successful retirement, you first need to imagine what a happy retirement actually looks like for you. Now, some might say that an ideal retirement would find you waking up in a private beach villa on a bed covered in crisp $100 bills. I do find that for most people, money is a big part of a happy retirement for many.

But you know, I also find that most people need other things to be happy in retirement. You don’t necessarily need enormous wealth to be happy in retirement . . . you just need enough. The trick is figuring out what that amount is, and then implementing financial strategies to get you there. 

Over the years, I have seen people with a great deal of money that don’t seem content. On the flipside, I often see people with a great deal of wealth that do have lives of great fulfillment. I can’t really say that a certain amount of money brings happiness. But what I have seen is that most people living under a cloud of financial stress and uncertainty are usually less happy.

There have been numerous studies published that have shown economic stress and uncertainty amp up our anxiety and stress. There certainly is a lot of that being thrown around these days.  But, you know what the biggest concern for most people approaching retirement is? It’s will they run out of money.  These folks aren’t expressing a belief that money will buy them happiness. Nope, these folks fear longevity risk, the risk they live too long.  Get this, according to the APA (American Psychological Association), their annual survey, “Stress in America” shows that stress about money and finances consistently tops the list for US adults.  Longevity risk is real and should not be ignored.

While for many it is possible to accumulate enough wealth to avoid financial insecurity in retirement; however, the same APA survey shows that only about 30% of American adults describe themselves highly financially secure. The fact is that most people will need some other avenue to create a dependable, predictable, and reliable income stream in retirement. Even those successfully creating wealth for retirement will often face downside economic and investment risks putting significant pressure on their income plan. 

In the past, people could often look to a combination of Social Security and company pensions to fund a secure income in retirement. And unless you work for the government, pensions are pretty much a relic of the past.  These days when you retire, your reliable paycheck retires with you. Sure, we now have 401ks and other retirement plans. But these plans are subject to market, interest and inflation rate risk.  And these risks are significantly magified if assets are still allocated to an inappropriate accumulation strategy when they should be allocated to a more appropriate risk-adjusted distribution strategy.  

One such instrument that might help – a fixed-indexed annuity. You see, when building out a sound retirement system, we never look at anything as either good or bad.  We always look at things as either appropriate or not. A fixed-indexed annuity can capture a portion of the market upside through indexed interest credits without having that dreaded downside so many experienced last March. Positioned appropriately, a fixed-indexed annuity can also create a measurable and predictable income stream, guaranteeing that you will never run out of income.  It’s kind of like those pensions our parents and grandparents had.    

There’s also evidence that adding an annuity to a well-positioned retirement system can enhance financial confidence for retirees. According to a recent LIMRA survey, some 73% of retirees who own an annuity believe they will be able to live the retirement lifestyle they want, compared with just 64% of retirees who don’t. Nearly 7 in 10 retirees who own an annuity are more confident their savings and investments will not run out if they live to age 90, compared with 57% of retirees who don’t own an annuity.

Folks, there are also other types of annuities, some appropriate and some not.  So determining if a fixed-indexed annuity is right for you requires self-education and often objective professional advice from a retirement specialist. While fixed-indexed annuities may be part of an overall sound financial and retirement system, you will still need flexibility in other parts of your system for contingencies like unexpected expenses and health care. Rarely, if ever, would any type of annuity be the sole landing spot for all of your retirement funds. 

Whether you position a fixed-indexed annuity into your retirement system or not depends upon your financial situation. But as you build out your retirement system in 2021 to give you the peace of mind you deserve, remember to look at all financial instruments not as good or bad, but whether appropriate or not to you. While all potential risks have to be mitigated in any sound retirement system, as you address market and longevity risks, a fixed-indexed annuity may be appropriate for you.  

So as always – be vigilant and stay alert, because you deserve more!

Have a great week folks.

Jeff Cutter, CPA/PFS is President of Cutter Financial Group, LLC, an SEC Registered Investment Advisor with offices in Falmouth, Duxbury, and Mansfield. Jeff can be reached at jeff@cutterfinancialgroup.com.

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