New rules for a 21st century retirement

A 21st century retirement needs a new set of rules to provide financial and emotional security for a post-career period that can last 30 years or more. “Rewirement: Rewiring the Way Your Think About Retirement,” a new book by professor Jamie Hopkins of the American College of Financial Services, does just that.

“Retirees naturally rely on the kind of financial knowledge they know worked for them [while] saving for retirement,” Mr. Hopkins wrote in the preface of the book. “Once they enter the retirement phase and find that the need to spend is more important than the need to save, they find that many of those practical concepts just do not apply anymore.”

A recognized retirement income expert, Mr. Hopkins has been instrumental in developing the American College’s retirement income certified professional designation program for financial advisers, which boasts more than 5,000 graduates and 11,000 current enrollees.

The college’s 2017 Retirement Income Literacy Survey underscored the public’s lack of knowledge about the drawdown phase of investing.

Three out of four retirement-age Americans failed the quiz on how to make their nest eggs last throughout retirement. More than 1,200 older Americans between the ages of 60 and 75 with at least $100,000 in assets who participated in the survey also displayed a worrying lack of understanding of vital topics such as paying for long-term care expenses, investment considerations and life expectancy.

“Retirees and people approaching retirement need to understand the strategies and tools available to make their limited accumulated savings and assets stretch out over a lifetime and to manage the risks they face along the way,” Mr. Hopkins wrote. “The good news is that this can be done by making smarter choices with regard to Social Security, Medicare, IRAS, and taxes by being proactive and executing a comprehensive plan.”

Some of his nontraditional planning tips include working longer, even if it’s part-time, to delay Social Security claiming decisions and postpone withdrawals from retirement accounts, giving both retirement benefits and invested assets more time to grow. Tapping home equity through a reverse mortgage is another way to stretch a nest egg and create tax-free income in retirement, and using a portion of a nest egg to buy an annuity creates a floor of guaranteed income. Finally, converting some traditional IRA assets to Roth IRAs, particularly during the first few years of retirement when income is lower, creates crucial tax-free income.

The book is written for consumers with a heavy emphasis on the value of working with experienced financial advisers who specialize in retirement income planning. But the target market may turn out to be financial advisers who want to give their clients a copy of the book as an easy way to understand comprehensive retirement planning and to underscore the value of holistic advice.

I am very familiar — and comfortable — with Mr. Hopkins’ multipronged approach to creating secure retirement income. In fact, parts of his book sound a lot like the consumer education seminars that I offer at venues across the country.

Over the past few months, I have experimented with the role of temporary snowbird, flying back and forth from my home near Washington to The Villages in Florida several times. I have shared the podium with annuity expert Tom Hegna, IRA guru Ed Slott and retirement income thought leader Moshe Milevsky at wealth summits sponsored by Parady Financial Group, which specializes in creating retirement income and managing long-term care and longevity risks through annuities and insurance so clients can fully enjoy their early go-go years. (Mr. Hegna, author of “Paychecks and Playchecks: Retirement Solutions for Life,” will be a featured speaker at this year’s InvestmentNews Retirement Income Summit in Chicago on April 30.)

There was also an unintentional consequence from my many trips to The Villages: I experienced life first-hand in one of the fastest-growing retirement communities in the country.

More than 115,000 people live in the sprawling age-restricted community 45 miles north of Orlando that includes 48 golf courses, more than 2,700 social clubs and three picturesque town squares where residents and their guests literally dance in the streets to live oldies music every night of the year.

Although I am not ready to relocate or swap my trusty BMW for a customized golf cart — the preferred method of travel in The Villages — I am delighted to see thousands of retirees enjoying the good life thanks to financial planning, both before and after they retire. As Benjamin Franklin famously warned: “Those who fail to prepare must prepare to fail.” Learning to rewire the way you and your clients think about retirement may be the antidote for failure.

(More: Social Security benefits losing buying power)