By Rick Hahn
My how time flies! It seems such a short while ago that it was 2004. George w. Bush was starting his 2nd term, “The Lord Of The Rings: Return of The King” won Best Picture in Hollywood, “Live Like You were Dying” was the top Country single, and American Idol was the # 1 most watched show in America!
Do you remember that in June of 2004 the average price of regular gasoline in the US was $1.92 a gallon? And we thought THAT was outrageous!
Coffee that month was $2.75 a pound, eggs $1.31 a dozen, and bread $.98 a loaf. Our government tracks the cost of goods and reports it as the Consumer Price Index (CPI). This figure is how we base our inflation rate and how we determine the purchasing price of goods and services. What is strange about the CPI and our governments approach to it is the sectors they omit in the calculation. Energy costs and food are not included in the calculations.
We can blame the government for that omission, under the Reagan Administration food costs were omitted and under the Clinton Administration, fuels costs were added to the list of categories not included in calculating inflation. To me that seems strange, the two things that are the most volatile to our budgets are not worthy of government tracking.
One thing is certain: Prices, taxes, health care costs are NOT going down; they never have, never will. Of course that wouldn’t preclude the government from freezing the prices on a specific category such as fuel. If the most recent war in the Middle East causes fuel expense to soar, the government may have to step in, just to protect our own economy. Has that every happened, indeed it has, under Abraham Lincoln, Franklin Roosevelt and Richard Nixon, many prices for goods were frozen.
When you look into your crystal ball, where do you want to be in 10 years? Do you plan to be retired? Still working at a job you love or hate? As we look into the future possible the bigger question is: WILL you have enough money in retirement and is your retirement account sustainable?
A recent report conducted about Baby Boomers found the 5 things most are concerned about.
- Having a catastrophic event that invades retirement funds
- Outliving retirement funds
- Government not fulfilling obligations
- Not having enough funds to begin retirement
- Current interest rates not providing enough return, forced to add risk to investment philosophy
How can you be sure you will have enough retirement income? That’s the real challenge and one which is far more complicated than it at first seems. The reasons are myriad but the two most visible issues are the most obvious, medical costs and overall inflation. A recent report by the US Department of Labor stated that since Medicare supplemental insurance have nearly doubled since 1990.
Inflation during the same time period (1990-2014) averaged 2.88% annually, meaning a prescription costing $20 in 1990 would now be $36.60. Over time inflation and the cost of basic life goods can have a strong effect on any fixed income retirement account. This just naturally cost more over time, but a fixed income literally means fixed.
Do you leave your retirement to chance? To hope and pray? The answer of course is obvious, planning is essential. Over the last 10 years the Financial Services industry has identified Income Planning as the most important and needed planning for the Baby Boomer generation. Fortunately, there are financial advisors now who specialize in “Retirement Financial Planning,” specifically Income Planning.
Instead of looking at your funds as the need for financial planning, consider retirement financial planning. In simpler terms, how much income can you generate form your accounts while reducing risk and protecting yourself from inflation concerns. Believe it or not, planning with a focus on income is available and very possible.
Over the past ten years there have been new products that are designed for income that guarantee income for as long as you live, regardless of how long you live. The concept is simple you allow a larger entity to accept the responsibility for performance of your important retirement income while at the same time providing strong and dependable guarantees.
Retirement Income Planning might be exactly your answer to concerns about income, inflation and a solid interesting retirement.