As you plan the transition of your farm business, the retiring couple will need a source of income to maintain their lifestyle. Regular readers of this space may remember that I commented on the goal of a retirement plan being to create 'lifetime income.' A new study shows that most people will benefit from expert advice in building a successful income strategy.
A recent Retirement Income Literacy study conducted by The American College of Financial Services says most Americans near, or at, retirement age failed a very basic quiz on how to make their nest eggs last. Only 20% received a passing score.
The study looked at how knowledgeable Americans in the 60 to 75 age bracket are on matters such as:
• Life expectancy,
• Social Security claims,
• Long-term healthcare needs, and
• Investment risks.
The group surveyed had a minimum of $100,000 invested, most people had more than $200,000 in assets, and 70% of them saw advisors.
Test results were dismal:
• 80% of respondents received an 'F' score;
• 14% received a 'D';
• 5% received a 'C'; and
• 1% received a 'B'
Nearly two-thirds are unfamiliar with the "4%" rule.
• Nearly two-thirds are unfamiliar with the "4%" rule
• Only 53% know that it is best to wait until ago 70 to claim Social Security for someone with a long life expectancy.
• Most respondents did not understand the basics of investments like bonds.
• 51% underestimate the life expectancy of a 65-year-old man.
Only 27% of respondents report having a written retirement plan in place – despite the fact that 63% say they have a relationship with a financial advisor.
It's interesting to note that the research shows most people think they know more than the really do. For example, one part of the survey asks about how competent the respondents felt about understanding long-term health care issues. Most respondents indicated a very high level of competence, yet only 40% of respondents got specific questions about long-term care correct.
A reliable source of retirement income is not automatic and you probably can't make the plan on your own. Consult with a fiduciary financial planner to discuss your retirement income options.
If this blog has got you thinking about your own situation, get in touch with my office at [email protected].
The opinions of Rich Dunn are not necessarily those of Farm Futures or the Penton Farm Progress Group.