A Trusted Path
In 164 years of forging trusted relationships, integrated financial advisor HM Payson has seen — and weathered — dramatic changes in the world of retirement planning.
Every day in 2018, some 10,000 baby boomers across the U.S. will turn 65. Many of them will retire, others will work for a few more years — out of choice or necessity — and still others will redefine retirement altogether. Whatever path they choose, it likely won’t look much like the one their parents took. “More, if not all, of the savings responsibility of future retirees is going to fall on their own shoulders,” says John Beliveau, a managing director at HM Payson, an integrated financial advisor in Portland. Beliveau and portfolio manager Jay Flower explain why financial planning is critical to ensuring that retirees’ resources last through their lifetime and support the lifestyle they desire.
How have retirement savings strategies changed in the past 30 years or so?
Flower: Baby boomers are living longer, so we have to plan for 30–35 years of portfolio-sustaining lifestyle expenses. Couple that with all-time low interest rates, and a conventional approach such as a 60/40 stock-to-bond split may not be as viable an option as it was 15–20 years ago. Thorough and expert financial planning is invaluable in these unprecedented times, no matter how far off
"We’re financial therapists, if you will. Markets can get crazy, and people can react emotionally. Our role is to take the emotion out of the decision-making process and be a true counselor to our clients so they don’t make bad decisions."
What’s the biggest risk to a financially secure retirement?
Beliveau: There are many, but if we were to rank them, excessive spending would be at the top. Most people can’t have everything they want, and for us to give meaningful advice, we need to understand what’s most important to them.
We ask them to rank their priorities and goals, and if compromises need to be made, we make sure they’re comfortable trading away numbers four or five in order to achieve their top priorities. Our holistic financial approach is a very empowering and supportive planning process that often reduces stress and anxiety through transitional phases in life and, perhaps more importantly, through the inevitable rough patches the financial markets will experience.
At what age should people approach a financial advisor for retirement planning?
Beliveau: The sooner the better. I’d say mid- to late 40s. Your highest earning years are your mid-40s to early 60s, and you want to ensure that you’re saving enough so that when you do retire and start to draw down, your resources will last. If you wait until only a couple of years before retirement, the adjustments that need to be made might be quite significant, and you may have to put off retirement or have a much lower lifestyle than you anticipated.
Plan for Long Life
Use a life expectancy of 90 as a starting point for retirement planning. That’s a 25-year retirement for those retiring at 65.
The 4% Rule A reasonable annual withdrawal over a 25-year retirement is 4 percent of your retirement-year portfolio value (that means $48,000 on a $1.2 million portfolio).
Couples should expect to spend $220,000–$250,000 for health care costs over the course of retirement.
Over 25 years, expect inflation to cut your spending power roughly in half.
How about after retirement?
Flower: It’s important that plans are monitored throughout retirement. It’s also important to engage the next generation. More and more, we’re seeing couples bring their children into the conversation to talk about what happens if there are health or long-term-care issues and what’s in their best interest in terms of taxes and legacy planning.