All Star Advice

Financial Planners, investment gurus, realtors, tax advisers, and insurance agents share their best advicein their own words

Use a combination of revenue streams, such as Social Security and insurance products, to provide guaranteed lifetime retirement income.

Since people are living longer, they’re concerned about outliving their savings. Will the money run out before I do? One of the things I try to do is put clients into guaranteed lifetime income products and build from there. Social Security, for instance, has a lifetime guaranteed income stream and an inflation adjustment. Some folks have a defined benefit pension plan in which they worked so many years and now a check shows up every month in retirement for the rest of their lives. Those have become rare. Then we look to see if that’s going to cover basic living expenses. Will it meet your housing costs, food needs, clothing—your basic lifestyle expenses? I like to have those guaranteed with a combination of Social Security, pensions, and if we have a shortfall then I recommend annuities—basically a private pension. This is where you invest a portion of your retirement nest egg and you’re guaranteed a certain payment for the rest of your life.

Pay down debt and use disability insurance to protect your emergency fund.

Have three to six months of expenses in your money market account. If you have a higher income, maybe you have six to 12 months, that’s when it may be a good idea [to dip into savings to pay down debt]. If you have six to 12 months of living expenses saved, get a disability insurance policy. That way, if you ever became disabled, you really wouldn’t need to dip into the money market funds anyway because your disability policy is going to help pay your expenses. If you don’t have six months’ worth—and it’s not the easiest thing in the world to accumulate money for emergency purposes—it’s not a good idea to start dipping into your money market to pay off credit card debt, based on the way the economy is right now. You do want to pay off debt, but you don’t want to rob your money market.

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