One way to help clients achieve a safer retirement is to use life insurance policies to cover the costs of long-term health care, says Steve Ruckart, a retirement planner and founder of RAI Advisors, a financial planning firm in Murfreesboro, Tenn.
Advisors looking to help their clients supplement Social Security in retirement have several options, Ruckart says. One is to include long-term-care coverage within a life insurance policy. About half of the major insurance companies now allow this coverage within life insurance policies, he says. If the money is not used for long-term care, it is inherited by the heirs.
“Other health-care costs also have to be budgeted into retirement planning. Chronic care and prescription costs can be $250,000 to $300,000 in retirement. I have seen people really get hurt because their advisors have not included this planning,” Ruckart says.
Advisors are overlooking other mistakes retirees are making as well. For instance, clients might be taking out too much, more than they need, when the market is good. Also, they should be taking money out of non-taxable accounts first and waiting to withdraw from taxable accounts until that money is needed for living costs.
“Advisors also need to talk to their clients about the sequence of returns on their portfolio,” Ruckart advises. “They may be making 8 percent on their portfolio now, but they cannot withdraw 8 percent. That is particularly true in the early years of retirement, because it will cause clients to run out of money later on.”
Ruckart, a Chartered Life Underwriter, advises clients to turn part of their portfolio into an annuity to supplement Social Security. Delaying payments on the annuity can help ensure that clients have enough money for today’s extended life spans, he says.