In Perspectives

In my last post I wrote about one method to protect retirement portfolios from the long term impact of market volatility, an often feared retirement risk.  However, there are other sometimes forgotten risks that can be just as devastating to a secure retirement.  Some of those are discussed below.

Longevity Risk:  Back when Social Security began, the average person lived to age 61.  That average has now increased to age 78.  Once you make it to age 65, you have a 50% chance of reaching age 85 and a 25% chance of living to age 92.  Therefore, it is critical that every healthy retiree plan for a long life expectancy, as the alternatives are not acceptable to most.

Inflation:  The above described long life expectancy statistics makes a retiree particularly vulnerable to the impact of inflation.  Even a relatively benign inflation rate of 3% will cause you to lose nearly half of your purchasing power over a 20 year period.  A well prepared investment portfolio will include sufficient growth assets and other “tools” designed to grow purchasing power sufficient to keep up with inflation over time.

Health Care:  It is no secret that health care costs have and will continue to increase rapidly.  It has been estimated that the average retiree will need over $200,000 of financial resources just to cover these costs.  Long term success will require careful consideration regarding the timing of your retirement, plus the judicious use of tools like “medigap” insurance policies, healthcare savings accounts and others to cover the health care costs that Medicare does not.

Long Term Care Risk:  It is estimated that 40% of those over 65 will need some form of long term care during their lives.  This is a big concern when the average annual cost of a nursing home is in excess of $75,000 and is not covered by Medicare.  Those without quality long term care insurance will be forced to pay these costs with their retirement assets.  Medicaid will begin to help after your assets have been primarily depleted, but probably will not pay for the cost of your first choice facility.

Taxes:  Failing to manage taxes during retirement can have a significant adverse impact on the overall success of a retirement plan.  Because each form of account (trust, IRA, health savings, etc.) has different tax characteristics, properly managing them for taxes is imperative.  How and when income is taken, as well as the investments utilized within each account, will determine your overall level of taxation and each dollar spent on taxes is one less available to meet needs.

Each retiree’s circumstances will determine the proper approach for addressing the above risks and solutions are therefore beyond the scope of this blog post.  However, recognizing that they exist is often the most important step in conquering them.  We would by happy to help you think more comprehensively about them as you begin to prepare for your retirement.

Legacy Trust and Your Right to Financial Privacy

At Legacy Trust we have established policies and practices that respect the financial privacy of all individuals who use our trust company. We believe it is critical to comply with the laws and regulations designed to secure your financial privacy. Your relationship with us as our client is very important to us, and we want you to understand our policies and practices about handling your information.

This Policy applies to you – This Policy applies to our relationships with individual clients who inquire about or obtain products or services from us for personal, family and household purposes.

Strict security measures – We take the security of information very seriously. We have established security standards and procedures to prevent access to client information. We maintain physical, electronic and procedural safeguards to guard client information.

Limited employee access – We have established procedures to limit employee access to information to only those employees with a business reason for accessing such information. We educate our employees about the importance of confidentiality and client privacy. We take appropriate disciplinary measures to enforce employee responsibilities regarding client information.

Why we collect information – We collect information about you to:

  • accurately identify you;
  • protect and administer your records, accounts and funds;
  • help us design or improve our products and services;
  • understand your financial needs;
  • save you time when you apply for new products and services; offer you quality products and services; and comply with certain laws and regulations;

We collect information – We collect and maintain your personal information so that we can provide investment management and other services to you. The types and categories of information that we collect and maintain about you include:

  • Information we receive from you to open an account or provide investment advice or other services to you (such as your home address, social security number, telephone, financial information and investment objectives).
  • Information that we generate to service your account or from our transactions with you (such as account statements and other financial information).
  • Information on your transactions with nonaffiliated third parties.

We have established procedures so that the financial information we collect is accurate, current and complete. We are committed to work with you to promptly correct any inaccurate information.

Our selective sharing of information – In order for us to provide investment management and other services to you, we do disclose your personal information in very limited instances, which include:

  • Disclosures to nonaffiliated companies as permitted by law, including those who help us service your account (such as providing account information to brokers and custodians).
  • Other limited disclosures as permitted by law, for example, required reports to government entities.

We do not share your information with third parties for marketing purposes. We do not sell your information.

Former clients – If you end your relationship with us, we will continue to adhere to the privacy policies and practices described in this notice.

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USA PATRIOT Act

Important Information About Procedures For Opening A New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

We apologize for any inconvenience this may cause; however, federal law prohibits us from waiving these requirements.

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