“We are living in a very challenging time period for entering retirement,” shared John Uyeki, SVP, Director of Financial Services at Chelsea Groton; Financial Advisor, Infinex Investments, Inc. “Many folks have been saving much of their lives in anticipation of retirement, but they may not have a plan for income generation. Unfortunately, with pensions becoming a thing of the past, and other traditional sources of high-quality income like savings accounts, CDs and government bonds not being sufficient enough to maintain spending habits, we need to look to new ways to generate real income in retirement. This will help ensure people can live the retirement lifestyle they’ve always wanted.”
Previously, the general rule of thumb was to put away 10% of income to meet future needs. Unfortunately, after covering the rising costs of rent or a mortgage, paying back high interest school loans, or having to take care of an older parent, consistently saving 10% isn’t always possible. And even if it was, it might not be enough to live well in retirement.
The team at Chelsea Groton Financial Services understands the challenges people face as they balance a number of ongoing personal and financial obligations with their goals for the future. They are prepared to help people think about how to make their hard-earned money work harder for them. They look at all sources of savings, income and spending holistically, and will put portions of earnings into different vehicles in order to help you get the outcome you’re striving for. More than 20% of the population will be 65 or older by 2030, so the need for income generation in retirement is paramount for a significant portion of our population.*
How a Financial Advisor Can Help You
At Chelsea Groton Financial Services, a significant amount of time is spent helping to educate clients on overcoming the challenges of generating income in this sustained low-rate environment. Changes in the financial environment, including tax laws and interest rates, will affect the amount of money that people are able to earn in retirement. Additionally, with inflation increasing the cost of medical coverage, clients need to make sure their income streams will be able to keep pace with these expenses. Furthermore, since many people opted to refinance their homes in the past decade, more clients have mortgages later in life than previous generations did.
One common question clients ask is, “Should we pay off the mortgage or add more towards retirement?” Unfortunately, there is no simple answer. Every client’s situation is different, but this is one area in which planning can pay off. In 1988, the average 30-year mortgage was 10.6%.** When people could pay down debt at 10.6% versus investing to earn 6-7%, it was easier to identify long-term benefits. Fast forward to today, and it is more challenging to decide between paying off 3.5% in debt or earning income at 4-5%.
“Everyone’s situations are unique, which is why we like to work with clients far in advance of their retirements so we can really help them prepare for their futures. We are in the business of helping folks convert their assets into retirement income. It is difficult to do that successfully if funds aren’t properly allocated,” explained Uyeki.
Why Making a Plan Matters
The first step to ensuring you can have an income stream in retirement, or you’re able to make up for any gaps in income or savings, is to talk with a financial advisor. The advisors at Chelsea Groton Financial Services ask new clients to answer questions and provide documents such as mortgage statements, current investments, tuition costs, and weekly spending, which help tell the stories of their current financial situations. Based on the information provided about spending, savings, and anticipated retirement income, the team of Financial Advisors will use risk and financial planning tools, along with decades of combined experience, to develop a customized plan that will help clients meet their goals for retirement. There is an emphasis during these planning conversations on how income could be generated in retirement with the options a client currently has, along with other vehicles worth considering. It’s also important that couples attend these meetings together so both people have an understanding of the financial decisions being made.
According to Uyeki, “At Chelsea Groton Financial Services, we take a holistic approach to planning. We listen intently to our clients, get to know their risk tolerance and are committed to helping them develop a mixed-asset portfolio that can meet a client’s goals and risk tolerance as they grow older and more dependent on that income. We care immensely about maintaining the trust of clients and the community for many generations to come.”
Revisiting the Plan
Once your financial plan is in place, it’s important to schedule a follow up at least once a year with your financial advisor since circumstances change. Divorces, marriages, taking care of grandchildren or elderly parents, or a spouse falling ill can all affect income and savings in preparation for retirement. Asking questions, including “where” documents can be found, “why” an approach or investments have been selected, and “how” things could change if a spouse passes away, will all help to alleviate possible challenges in the future. As income rises and retirement dates get closer, savings behaviors and ensuring your financial plan is set up to maximize growth in retirement become more and more important.
“We try to educate clients on the importance of not only making a plan, but sticking with a plan. Once we learn about a client’s financial situation, we take a strategic approach to optimizing the assets a client has. We think about how much income a client will be able to generate based off the assets he or she has now, and in the future. Our goal is to ensure clients are comfortable with the plan moving forward, and are properly allocated to potentially have the long-term income they will need to have the retirement they’ve always wanted,” continued Uyeki.
If you’re interested in learning more about the ways the team at Chelsea Groton Financial Services can help you develop a custom financial plan to suit your needs, please visit chelseagroton.com or call 860-572-4040.
About Chelsea Groton Financial Services
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA / SIPC. Chelsea Groton Financial Services is a trade name of Chelsea Groton Bank. Infinex and the Bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.
* U.S. Census Bureau, “Projections of the Size and Composition of the U.S. Population: 2014 to 2060,” March 2015.