Retirement Planning: Focus on the "sweet spot"

Results from the Bureau of Labor Statistics’ 2017 National Compensation Survey reports that 23 percent of U.S. workers participate in a pension plan. That’s a big change from the 1960’s when half of the private sector workforce looked forward to the security of a pension to provide them with the money they’ll need throughout their retirement.

Today, the outlook for existing pension plans is questionable at best. The New York Times recently reported that the federal government has formed a congressional committee “to craft what could effectively be a federal rescue of as many as 200 so-called ‘multiemployer’ pension plans.”

“There was a time that you retired, you shook hands, you got the gold watch, and you got a pension for the rest of your life. Those days are history,” said Dan White, President and CEO of Daniel A. White & Associates, LLC.

White says that the decline of pensions plans has left people to figure out the financial aspects of their retirement on their own, and that poses a problem for a significant amount of people. He points out that while many people know they have to save and build up money for retirement through 401(k) plans offered by their employers, the average person often changes jobs from a few to several times throughout their career. This entails entry and exit and rollovers from one employer retirement plan to the next.

“It usually entails, what I call a mish-mash or a dart-board approach. People have different accounts through different institutions, or they may have consolidated 401(k) plans together. So, there's no real rhyme or reason to how it all fits together," said White.

In addition to fund contribution plans company's offer through 401(k)s, another main source of lifetime income for people comes from securities, so it's important to make sure they are making the right decisions when drawing from Social Security. But most people don’t incorporate how or when to include these disbursements into their plan, says White.

Ultimately, people fear running out of money – and since Americans are now living into their 90s and beyond, the fear is real.

“Annuities are vehicles that we use quite frequently with people to guard against longevity issues. Whether you’re considering immediate annuities, or deferred annuities with guaranteed income riders, or even qualified longevity contracts, annuities have to be part of the mix. Retirement is not ten or 20 years anymore, it could be 30 or even 40 years – some people are going to be retired longer than they were employed,” said White.

So, the team at Daniel A. White & Associates help to educate clients on how it all fits together and focus on what White calls “the sweet spot” between the ages of 59.5 to age 70.5 “because from a tax planning standpoint, they have more flexibility at this stage of their life than they’re ever going to have again.”

“It is important to educate people about how the pieces and strategies have to fit together. Between social security, RMD's, and where they’re going to get the income from, to what kind of tax brackets their going to fall into – it's really an education process for the client," White said.

Another consideration connected to issues surrounding longevity is planning for long-term care. Many people ignore it, or hope it isn't necessary – but White has an answer for them.

“Hope is not a strategy,” he says, suggesting that while people have to look at traditional long-term care options, what has become increasingly popular today are hybrid life insurance plans.

“If they never go into a home and never need any care, then it turns into tax-free life insurance that become a benefit to their children. Or, if they did require some care, they could convert some of the death benefit to long-term care dollars,” explained White. “That's what many people today are using because it covers the objection of 'I may never use the money.'"

Because there are a lot of moving parts involved regarding retirement, White says that educating clients and providing options is imperative. For instance, considerations like multiple properties, rental properties, and inheritances are examples of how everyone’s financial situation is unique.

There are also situations where it is necessary to figure out how to make money last when saving during retirement was not as successful and plentiful as people had hoped, so understanding how the timing of social security disbursements will affect them is critical.

“How do we determine when to take social security? Well, we ask questions, it's about the fact-finding. We ask about family history and longevity. We ask about health issues and if there are any that might prevent them from living a long life. What objectives do they have? Is it important to pass money along to the next generation? You have to dig and drill down during a question and answer period with the client to find out what it is that they are truly trying to accomplish, and then develop a strategy for them that will help them accomplish those objectives,” White explained.

Striving to put clients’ interest first, Daniel A. White & Associates has over 700 clients across four states including Pennsylvania, Delaware, Maryland, and New Jersey.

“I believe there's always going to be a place for a financial professional to have a face-to-face meeting with someone," said White, adding that financial planning options can be overwhelming for people.

While White encourages clients to maximize their savings first and foremost, he cautions that too often he sees people make decisions on how to invest within their 401(k) plan based on 10-year averages of fund performance.

“They're not looking at expenses or whether the current managers for those funds are even the people responsible for those averages. These are some of the things that we point out to them,” said White. “The key is that while education is a great thing, you can't get the answers if you don't know what questions to ask, and a lot of times, the clients don't know what the questions are.”

Ideally, the clients are going to make the decisions, but it's the job of Daniel A. White & Associates to give them enough information to help them make informed decisions.

“If the relationship is going to be open and honest between the financial professional and the consumer, all of the cards must be on the table,” said White, adding that it includes explaining to clients how one is being compensated, what products and services he or she offers, and how the client will pay for them.

Boldly, White says that many financial professionals have been hiding behind the investment prospectuses they hand out to clients and suggests that the industry support more disclosure of fees and expenses up front as part of the fiduciary responsibility.

“I don't think we have the necessary disclosure in the securities industry with prospectuses or in the 401k industry either,” he said.

White started his career in the insurance industry and eventually landed at Provident Mutual Life Insurance Co. where he went through what he described as “an extensive training program.” He also continued his education to become a Chartered Life Underwriter (CLU®), a Chartered Financial Consultant (CHFC®), and a Retirement Income Certified Professional (RICP®) – three prestigious industry designations.

When Provident was sold to Nationwide Financial Services Inc. in the late 90s, White launched Daniel A. White & Associates specifically to work with seniors nearing or already in retirement, a client niche he had developed throughout his career. Today, the firm recently relocated to a new headquarters in Glen Mills, Pennsylvania and serves the age 50-plus marketplace. Active in the local community, they regularly offer seminars and educational programs to promote financial literacy.

In 2017, White authored his first book, “What You Don't Know About Retirement Planning Can Hurt You.” In it he takes readers through the retirement process with financial strategies he has successfully used over the years.

Proceeds of the book help to benefit Granting Others Dreams (G.O.D.), a Pennsylvania-based charity that helps people facing hard times due to job loss, disability, or other unforeseen circumstances.

At the foundation of all of White’s work, through Daniel A. White & Associates and the firm’s community service initiatives, is the good old-fashioned Golden Rule his mother taught him years ago: “Do unto others as you would have them do unto you.”

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