Enjoying It

Enjoying It.

Congratulations, you’ve made it. This is where all the planning, saving and hard work pays off. Your dedicated focus for all those years means you’ll now be able to reap the rewards and live the dreams you committed to in the Starting Out stage. Or, perhaps living close to family or a good medical facility has become a priority over that beach you’d dreamed about. Either way, your reward will be the peace of mind that comes from having saved for this day.

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"The number of Americans retiring abroad grew 17% between 2010 and 2015."1
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"62% of retirees say social security is a major source of income. Those retirees truly “Enjoying It” can supplement that."2

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"72% of retirees say they are “somewhat” or “very” confident that they’ll be able to maintain a comfortable lifestyle."3

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"94% of retirees say they are generally happy and 90% say they are enjoying life."3

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"The average retired worker nets $1,347 per month in social security benefits as of April 2016."4

The Basics
Will I lose my social security benefits if I remarry?

If you're receiving benefits based on your own work record, your benefits will continue unchanged. Your new marriage will only affect your social security benefits if you’re receiving spousal benefits based on your former spouse's work record. If that’s the case, those benefits will generally end upon your getting remarried. Now, if you were the working spouse during your first marriage, your remarriage does not change the social security benefits paid to either your new spouse or ex-spouse. 

As you might guess, the rules surrounding payment of social security benefits are complicated. For example, if you're a widow(er) under age 60, or you're disabled but under 50, remarriage ends any benefits based on the record of your deceased spouse. However, if you remarry after age 60 (or after 50 and are disabled), those benefits remain intact, unless you get spousal benefits through your new spouse (at age 62 or older) if those benefits are higher. If your second marriage ends as a result of death, divorce, or annulment in less than 10 years, you will again be eligible to collect benefits on your first spouse's record. Benefits paid to a disabled widow(er) are unaffected by remarriage. 

For how the rules apply to your specific situation, contact the Social Security Administration at (800) 772-1213.

What is long-term care insurance?

Long-term care insurance (LTCI) is available in a wide variety of coverages, but it is all designed to take care of you in a setting such as a nursing home or other assisted-living facility. Look for a policy that covers the costs of round-the-clock nursing home care at the custodial, intermediate, and skilled level. You may also want a policy that covers any expenses associated with assisted-living residences (provided that the facility is state certified), adult day-care centers, and respite care (temporary professional care when your regular caregiver is on vacation). 

Other benefits may include at-home care provided by registered nurses; respiratory therapists; physical, occupational, or speech therapists; registered dietitians; or licensed social workers. Policies may pay for the cost of caregiver training for a family member or friend. They may also cover the cost of a registered nurse or other independent healthcare professional who can act as your consultant to discuss the quality of your care.

There are many requirements you must meet before an insurance company will issue these benefits. It’s wise to speak with your insurance advisor before purchasing any LTCI.

What options do I have to pay for nursing home care?

You generally have three choices when it comes to paying for nursing home care: out-of-pocket, long-term care insurance, and government benefits. 

Paying for nursing home care yourself is the least attractive option. The care is expensive and could eat through your savings in a short amount of time. 

For those who can plan ahead, long-term care insurance is a common choice. Premiums are based on your age when you buy the policy and the type of benefits you choose. Long-term care insurance pays a fixed dollar amount of benefits per day, so it likely won’t cover the entire cost of nursing home care.

Government assistance may be an option for those with little income and few assets. If you qualify, Medicaid may pay for your nursing home care. Medicare, on the other hand, covers only short-term stays in a nursing home for the purpose of rehabilitation after a period of hospitalization. Veterans may be eligible for care in a VA facility, although veterans with service-connected disabilities are more likely to receive care, due to limited space.

If my spouse passes away, do I have access to their full retirement benefits?

It depends upon how your spouse set up their retirement accounts. For an IRA to go to you, you’ll need to have been listed as the designated beneficiary. Your spouse’s 401(k), however, will automatically go to you as long as you were legally married to your spouse at the time of their death. 

Social Security benefits are more complicated. You’ll receive a one-time death benefit of $255 if you were living in the same house with your spouse. Beyond that, there are survivor benefits that are so complicated, the Social Security requires that you speak to a representative to receive them.

Are You Really Enjoying It?

Retirement can be truly enjoyable with a successful retirement plan. How is yours working out? If it could use some adjustments, you should talk to an advisor about:

  • Getting your debt in order.
  • Maximizing social security.
  • Making sure your allocation fits your income needs, risk tolerance and retirement objectives.
Go-Go. Go-Slow. No-Go.

In retirement, your spending will likely change over time. In his book, "The Prosperous Retirement: Guide to the New Reality," Michael Stein introduces three distinct stages of retirement.

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Go-Go

You’re still pretty active in this first stage and spending more than in any other stage. This is where you may travel, take up new hobbies and spend time (and money) on the grandkids. This stage typically lasts until age 75.

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Slow-Go

Around 75-85, the energy starts to slip and the pace begins to slow. Homes are downsized and spending is too. In fact, annual expenses typically decline 20-30% in this stage.

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No-Go

As you pass 85 until the end of your life, your world and your expenses tend to shrink. The one exception, of course, is medical and long-term care costs. Planning for these uncertain expenses is one of the greatest challenges of retirement planning.

Five Retirement Income Strategy Options

Retirement planning boils down to this: making sure you have enough income to meet your retirement goals once you’ve stopped working for income. That’s the Enjoying It part! But if you find you need to make some adjustments to create a stream of income that better meets your retirement needs, you may want to consider one of these five strategies:

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Systematic Withdrawal.

At retirement, you take an initial withdrawal from your portfolio of a certain percentage, and then adjust that withdrawal that same percentage each year for inflation. You can do this with any percentage, but the strategy started with 4% as the standard. For example, with a $500,000 portfolio, you would take $20,000 in year one (4% of $500,000), then in year two you would adjust by 4% and take $20,600 and so on. Some researchers have shown that this  strategy could make your money last for 30 years. Others argue 4% is too low and you could end up leaving most of your money behind, while still others have data to prove 4% is too high and you’ll run out of money altogether. If you go this route, resist the temptation to set it and forget it. It requires monitoring and adjusting as needed. Remember, everybody’s situation and objectives are unique.

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Buckets.

The Financial Planning Association (FPA) defines the bucket strategy as setting up separate pools of investments with lowest-risk investments in the near-term segment, somewhat higher-risk investments in the next segment, and the riskiest portfolio (highest reward) in the longest-term segment. You then draw income from one segment at a time, using assets from the next bucket for income when the current bucket is depleted. Sounds good, right? But spending isn’t equal across the short- to long-term (see “Go-Go, Slow-Go, No-Go” above). And many planners recommend more than three buckets, while others pull from other buckets before the first one is empty. Like any strategy, it isn’t totally black and white. It takes constant monitoring and adjusting to match the dynamic nature of retirement.

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Flooring.

The FPA defines flooring as classifying retirement expenses as essential or discretionary. Essential expenses are funded by annuity guarantees or low-risk investments. Discretionary expenses are funded by a mix of medium- and high-risk investments. By annuitizing a portion of the portfolio to pay for everyday expenses, you can lock yourself into fixed income. The good: you don't run the risk of running out of money at the end of retirement like the first two strategies. The bad: you run the risk of under spending and living at a reduced lifestyle. In addition, you could run short on liquidity if an unexpected expense calls for a large lump sum of funds.

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Required minimum distributions.

While assessing strategies that "best balance the risk outliving wealth against the cost of unnecessarily restricting consumption,” the Center for Retirement Research at Boston College concluded that the IRS's required minimum distribution rules may be a viable alternative. Under the RMD rules, assets must be distributed and included in taxable income on the April 1 after a person reaches age 70½. Using this worksheet, you can figure this year’s required withdrawal for your traditional IRA. Each year the divisor changes, as does the amount in your account based on investment performance. This is a simple, straightforward income strategy. But is it right for you?

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Interest only.

An even more straightforward approach is leaving the principal in your accounts and using only the dividends on stocks or the interest on bonds or certificates of deposit to provide income in your retirement years. The trouble is, only a small percentage of people are able to afford to use the interest-only strategy to fully meet their income needs in retirement.

Not sure which strategy is right for you? Start by asking the right questions. Check out “Designing a Smart Retirement Income Strategy—5 Questions to Ask” … then talk to an advisor.

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"67% of workers plan to work for pay in retirement. However, only 27% of retirees report they have actually worked for pay in retirement."2

BOK Financial Corporation (BOKF) offers wealth management and trust services through various affiliate companies and non-bank subsidiaries including advisory services offered by BOKF, NA and its subsidiaries BOK Financial Asset Management, Inc. and Cavanal Hill Investment Management, Inc. each an SEC registered investment adviser. BOKF offers additional investment services and products through its subsidiary BOK Financial Securities, Inc., a broker/dealer, member FINRA/SIPC, and an SEC registered investment adviser and The Milestone Group, also an SEC registered investment adviser.

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