Q&A with Retirement Expert Tom Hegna


We recently interviewed retirement expert, Tom Hegna, and asked him some of the most commonly posed retirement questions. Here’s what he had to say.

WHAT IS THE MOST IMPORTANT THING TO CONSIDER WHEN SAVING FOR RETIREMENT?

Hegna: The most important thing for retirees is making sure their basic expenses are covered with guaranteed1 lifetime income. This can be in the form of a pension, Social Security and an annuity. By covering your basic expenses, you help take longevity risk off the table. Longevity risk is the risk that you will live longer than your retirement savings. Why does this matter? The longer you live will have an effect on all the other risks we face like market risk, inflation, deflation, health care risk, etc.

WHY DO YOU THINK AMERICANS STRUGGLE TO SAVE FOR RETIREMENT?

Hegna: If I told you that people spend more time planning their yearly family vacation than they do planning their nearly 20 years of retirement, would that surprise you? Any plan is better than no plan, but many Americans simply don’t sit down and conduct a yearly review of their retirement savings plan. People who fail to plan, plan to fail. The people who are actively engaged in the planning are much more likely to have a happy retirement.

WHAT PRODUCTS CAN HELP YOU BUILD A NEST EGG?

Hegna: I don’t necessarily buy into the concept that you need to make your “number” bigger and bigger and bigger, which would indicate there is a specific number to shoot for. I think you need to turn it around and say, how much income do I need? And what is the most efficient way to generate that income amount? Once you know that your basic expenses are covered, then that frees you up to explore different strategies.

WHAT ARE SOME WAYS RETIRED AMERICANS CAN SUPPLEMENT THEIR SOCIAL SECURITY CHECKS?

Hegna: Social Security is the “best money” that money can’t buy.  It’s not easy to just replace an income stream that has yearly cost-of-living adjustments to account for inflation, that is backed by the U.S. government,  and that grows at almost 8% per year from age 62 until age 70 (if you are able to delay your benefits). However, Fixed Indexed Annuities can be great products to help manage your risk and can provide a consistent stream of income in retirement. Also, I would be remiss if I did not mention that life insurance can be a valuable tool to protect your Social Security checks in case of a spouse passing away.  Life insurance can also be structured as a potential source of retirement income.  If properly funded, you can access the cash value using tax-free loans and withdrawals to supplement retirement income, or other goals.2

IF YOU COULD ONLY GIVE ONE PIECE OF RETIREMENT ADVICE, WHAT WOULD IT BE?

Hegna: Look, any plan is better than no plan, but where do you begin? Let’s keep it simple.

Step 1: Cover your basic expenses with guaranteed lifetime income.

Step 2: Optimize your portfolio to protect against inflation.

Step 3: Have a plan for long-term care. Follow these three simple steps and you will be on track for a balanced retirement.

Step 4: Consider life insurance, which can be structured as a potential source of retirement income.  If properly funded, you can access the cash value using tax-free loans and withdrawals to supplement retirement income, or other goals.

Follow these four simple steps and you will be on track for creating a balanced retirement.

1The guarantees of annuities are dependent upon the claims-paying ability of the issuing company.

2The ability of a life insurance contract to accumulate sufficient cash value to help meet accumulation goals will be dependent upon the amount of extra premium paid into the policy, and the performance of the policy, and is not guaranteed. Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender.  Surrender charges may reduce the policy’s cash value in early years.

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