Wednesday, October 10, 2018

Estate Planning Attorneys Reassured by Planner's Retirement Prognosis

 
Clients can stop freaking out about having enough money in retirement, Craig Israelsen assures readers of Financial Planning.
 
At Rebecca W. Geyer & Associates, we were happy to learn of Israelsen’s positive investment prognosis.  While we’re estate planning and elder law attorneys, not financial planners, we’re obviously concerned with our clients’ retirement security.
 
 
Since 1926, the author explains, there have been 33 distinct “client lifetimes”. By following a simple investment strategy, he says, all 33 would have been left with millions of dollars if they lived to age 95. For purposes of the analysis, several assumptions were used: 
  1. The client begins to invest for retirement at age 35, retires at age 70, and lives to age 95, meaning there is a 35-year accumulation period followed by 25 years of distributions.
  2. The client withdraws only the Required Minimum Distribution each year and nothing more, and each year’s RMD is adequate for their needs.
  3. In the accumulation period, the client saves 8% of annual income, investing it in 60% stocks, 40% fixed income.
  4. The average 35-year rolling return for this annually-rebalanced portfolio was 9.97%.
  5. The first of the 33 clients turned 35 in 1926, the last in 1958.
In the Israelsen study, the largest balance in the retirement portfolio at age 70 was $1.76 million, the smallest $860,000. Over the next 25 years, an average $236,843 was withdrawn, based on RMD guidelines.

The moral of the Israelsen study, he says, is this: A retirement portfolio that is built for growth during both the accumulation years and the distribution years can distribute far more to the retiree than its starting balance at the beginning of retirement. Your clients, Israelsen assures financial planners, will likely have enough if they budget reasonably.  All that anguishing in advance, he says, robs those clients of the joy that can accompany the new opportunities in the final chapter of their lives.

At Geyer Law, we understand the challenges, fears, and family dynamics that come into play with clients’ legal issues, and we are delighted to hear that at least some of the fear of portfolio shortcomings in retirement may be unnecessary!

- by Rebecca W. Geyer
 
 
 


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