Page 33 - Investment Advisor - October 2021

has dubbed a “come what may” bucket. For wealthy clients, On the financial side of retirement, to what extent will
this extra bundle of assets can come in handy to draw from ongoing low interest rates impact retirees?
late in life. Retirees have to make peace with the fact that the safer assets
in their portfolio will have very low yields attached to them.
IA: Have you noted any potential new retirement trends? They need to recognize that the point of those safer invest-
Christine Benz: The pandemic has changed the nature of work ment assets isn’t return on capital; it’s return of capital. It’s the
for many people, who are now able to work from home, at least ability to spend those assets if you need them or if your equity
part of the time. This is still in the early days, but I’m keeping assets are down.
an eye on people who might have otherwise been inclined to Cash and high-quality fixed income assets still serve that
retire soon but plan to stick it out and work longer. purpose despite the fact that yields are very, very low.
Especially from a financial standpoint, they’ve decided it
makes sense to continue working since it might be easier for How should retirees and pre-retirees protect their assets from
them: They don’t have to commute, and also, they can [relo- rising inflation?
cate] to where they want to live. Retirees, especially those living on fixed-rate investments,
They may be people in their early 60s who wanted to retire can think about protecting purchasing power in a couple of
when they were 65 or so and also people who are post-65 and different ways.
have decided “I think I can hang on till I’m 70” and potentially One is making sure their portfolio has an ample allocation to
hold off on [claiming] Social Security. equities because over time, stocks tend to have a higher return
than the inflation [rate]. And within the safer portion of the
Is the idea of semi-retirement gaining momentum? portfolio — fixed income — retirees can look at I-bonds and
It’s a phenomenon. People are dealing with it in different ways. Treasury inflation-protected securities [TIPS].
There are financial reasons why they might have a hybrid
semi-retirement. At what point would a retiree acquire such products?
In addition, many might derive a sense of purpose from Ideally, a financial plan would factor in all these risks in
their work: Continuing to keep a hand in gives them that sense advance rather than your being reactive [to what’s happen-
of vitality and personal connection they may be hard-pressed ing in the economy]. The last thing you want to be doing is
to replicate without work. adding assets to a portfolio when the risk of something is
already apparent.
Will these folks stay in the field in which they built their career? [Like now], trying to buy inflation protection today,
They might continue that but now work in a scaled-back fash- when inflation has been splashed across the headlines for
ion. Or maybe they’ll step out of that field and get a job that several months.
doesn’t tax them in the same way, like working at Trader Joe’s,
where, at the end of their shift, they’re able to walk out and not What sort of plan should retirees have for long-term care?
think about work. There’s a lot of sad baggage that accompanies long-term care
decision-making, and long-term care is also very costly. People
You spent part of your last sabbatical taking a “faux on the wealthier end of the spectrum may be able to self-fund
retirement.” Tell us about that concept. those expenses from their assets.
It’s a trial run, an experiment, to see what retirement might The key will be to make sure their financial advisor is right-
actually feel like. It can be valuable to think things through liv- sizing that long-term care fund and segregating those assets
ing out your days in the way you expect to when you’re retired. from the spendable assets. For such clients, I like the idea of
Afterward, you can figure out what you liked about that and having what I call a “come what may” bucket to pay for long-
what you didn’t like. term care expenses or for additional funds once the client’s
portfolio is depleted. It’s an additional bucket to carry you
But that sounds similar to going on a vacation, rather than through those sort of late-life situations.
experimenting with an actual day-in, day-out way of life. If neither of those eventualities comes to pass, you could
Thoughts? use the fund to perhaps give assets to your children, grand-
That’s definitely a risk to guard against: You need to recog- children or to charity. At the other end of the spectrum are
nize that retirement [likely] won’t be all golfing and going people who will rely on government-provided long-term care,
out to lunch. which is Medicaid.
It’s important to think about what your sense of purpose
will be in retirement. You need to create a plan. I don’t think What about buying a long-term care insurance policy?
you’d want to wake up on Day 1 of retirement without thor- That might be [appropriate for] the middle group. One would
oughly thinking about what your days might be like. be traditional long-term care insurance and the other, a

OCTOBER 2021 INVESTMENT ADVISOR 31