Retirement Decumulation: Key Concepts

10 Critical Messages for Influencers

  1. We need to realize that America faces a national crisis brought on by some 50 million At-Risk Middle American households, many of which have neither the assets, preparation, support systems, nor protections to finance retirement years.
  2. As a nation, we must rethink and reposition the entire notion of retirement, deemphasizing early retirement as a symbol of financial success while simultaneously encouraging people to work longer for their own benefit.
  3. Retirement decumulation planning and practice must be made a priority consideration equal to the nation’s societal emphasis on asset accumulation, education, personal health, and nutrition.
  4. Motivating At-Risk Middle Americans to work longer, take Social Security later, and reduce their borrowing as they age are vital components in improving their retirement years and in avoiding a national crisis.
  5. Responding to the retirement decumulation crisis requires a research-based behavior change campaign, similar to how the nation changed public attitudes and habits toward smoking.
  6. Improving At-Risk Middle Americans’ financial behaviors requires building societal and peer influences that reinforce the importance of being prepared to finance one’s retirement.
  7. The nation’s retirement financial infrastructure must be revised and improved to make it harder for Americans to make harmful decisions, and easier to participate in programs that automatically help them save and spend their retirement funds wisely.
  8. Employers must become more active in supporting later retirement, and in providing financial literacy and planning assistance to their employees and retirees.
  9. Government must consider policies specifically to improve financial literacy, create consumer-centric advice resources, design and regulate suitable consumer financial products, and promote better consumer decision making, especially regarding Social Security retirement benefits.
  10. The financial services industry must create a market for and provide consumer-centric retirement planning and management services to At-Risk Middle American households while simultaneously creating financial products to meet their unique needs.

10 Truths At-risk America Must Believe

  1. Many working-class and middle-class American households are at risk of catastrophic personal financial crisis because they have not adequately planned for how to pay themselves in their retirement years.
  2. It is the responsibility of every American to know his or her financial situation and know the answers to these questions: How am I going to use my house, Social Security, pension, and any savings to pay myself during my retirement years?
  3. Even though it may seem like a luxury, getting objective retirement advice from a qualified financial planner is important and needs to be considered.
  4. Americans are living longer, which means you need a plan to pay yourself during your retirement. Understand that retirement could last several decades.
  5. If you are able to, working until you are between 66 and 70 will significantly improve your ability to pay for a quality retirement life.
  6. Taking Social Security payments too early means receiving less money each month than you would receive if you waited for even a few years. This could subsequently result in you not having enough to pay yourself through all of your retirement years.
  7. Your retirement spending plan is not complete until you know how you will pay for medical and long-term care needs.
  8. Putting at least part of your retirement savings into an annuity that will give you a regular monthly payment for the rest of your life creates a dependable source of income.
  9. To maintain a predictable cash flow in your retirement years, pay off your consumer and credit card debt before you retire, and don’t borrow money during retirement unless you know precisely how you’ll pay it back.
  10. Spending your 401(k) savings before you retire has a negative impact on your ability to pay for your retirement. 

10 Critical Messages for Individuals Approaching Retirement

  1. It is up to you to educate yourself and have a realistic plan to pay for your retirement years.
  2. Start your planning with the realistic assumption that you must spend dramatically less once you retire. Costs probably will be higher and your disposable income likely will decrease due to inflation.
  3. For best results, think in terms of saving for and creating a monthly “retirement paycheck” for yourself.
  4. Get advice from a qualified financial planner on how best to use your retirement assets, including your pension, 401(k), and the value of your home.
  5. Working longer and delaying Social Security up to age 70 will dramatically improve your quality of life by giving you the “Retirement Triple Play”:
  • You will receive a much larger overall monthly benefit, and all Social Security retirement benefits are adjusted for inflation
  • You will keep adding to your retirement nest egg instead of depleting it too quickly
  • You may keep your health-care benefits longer
  1. Aim to work until you’re at least 66, but save and plan your spending as if you were going to retire at 60.
  2. You do not know whether your retirement will last less than 10 years or more than 40 years. To be prepared for reaching advanced age, continue saving and making wise investments even during your retirement.
  3. Have a plan for health-care coverage and out-of-pocket medical and health-care expenses.
  4. If at all possible, pay off your mortgage and otherwise reduce your housing costs before retiring. Likewise, don’t retire if you still have credit card and other consumer debt.
  5. Never forget that your retirement money is being targeted by sophisticated con artists, Internet fraud, and financial scams. Make no decisions too quickly, and never without double-checking the facts. Live by the rule that if it sounds too good to be true, it almost always is.