What’s going to happen when your paycheck stops? It’s one of the biggest questions that people nearing retirement have, and it’s one that Melissa Morici, a financial advisor with Ameriprise on Lenox Drive in Lawrence, has become an expert at answering.
Morici grew up in a family that moved around the country a lot, never putting down roots in one place. She had an early education in business, and had her own Amway route at age 11. But she had to become financially literate the hard way. She joined the Army at age 17 after high school, got married, and had four children. She always let her husband take care of the finances. But when he died of cancer in 2005, she suddenly became responsible for the financial wellbeing of her family.
“I was literally sitting at the kitchen table trying to figure out what to do. I didn’t know who held our mortgage. That’s what eventually led me down the road into this line of work. I thought if I went into finance, I could help somebody else so they didn’t feel the way I did that day.”
Morici went into sales and marketing, and later joined Ameriprise and trained to become a financial advisor. She also remarried, and now has six children. She says her favorite part of the job is helping people have a plan and prepare for the unexpected.
On Thursday, August 14, at noon at Ameriprise on 1200 Lenox Drive in Lawrenceville, Morici will give a seminar about building a confident retirement. For more information, call 609-512-3907 or visit www.ameripriseadvisors.com/melissa.morici Here is some of Morici’s advice, in her own words:
It’s difficult for people to imagine what life will be like when they start to withdraw money from their hard-earned savings. For many, the feeling of anxiety often comes from trying to determine whether they have enough to cover essential living costs in retirement.
Many people would consider these the basics of day-to-day living. They include:
Food, shelter, and clothing — the staples of survival in life, such as groceries, housing costs, and utilities.
Transportation — expenses to maintain vehicles or to use mass transit.
Healthcare — premiums for insurance coverage and out-of-pocket expenses.
Other insurance — on your home, cars, life, and even long-term care coverage.
Maintenance — fees you pay for care of your home, vehicles, and other possessions
These are the primary necessities of life, no matter what stage you are in. We assume during our working years that our paycheck will cover these costs. But in retirement you need to create your own paycheck. At the very least it needs to be sufficient to pay for these basic living expenses. Any additional funds can be used for other goals you have in retirement, such as travel, hobbies, or vacations.
Social Security is just the start. An effective strategy to deal with essential expense is to find guaranteed or stable income sources to help cover these costs. For most people, the core source of continuous monthly income in retirement is Social Security. While it is an important component, it’s unlikely that Social Security can fully cover essential costs in retirement.
Beyond Social Security, retirees can consider several solutions:
Investments in fixed income instruments that will provide a reliable source of income. In years past, many people relied on income from bank CDs or bonds to generate cash flows during retirement. This is a more challenging option in today’s low interest rate environment, where the income produced by these instruments may be too small to fill the gap left by Social Security.
Employer pensions that provide stable monthly income. Fewer Americans actually have access to such a plan anymore, and even some who do have seen their expectations for pension payments come up short.
Annuities can provide a guaranteed or stable source of income. Annuities are backed by the issuing insurance company, and subject to the claims-paying ability of the issuing insurance company. Not all annuities are alike. You should consider your options carefully before choosing to purchase an annuity contract.
It’s critical to have a plan. Essential expenses are a reality that will continue throughout your retirement. Because of this, you want to make sure your money will last. Investments that provide a guaranteed or stable stream of income may be part of the solution to cover your retirement budget.
You can start by determining how much of your essential expenses can be covered by Social Security or pension payouts. Then calculate how much money to place in other investments to generate sufficient income to fill in the gap. Keep in mind that living costs will rise during your retirement, so be sure to account for this as you structure your lifetime income strategy. Any money leftover can be dedicated to “discretionary” expenses — pursuing your other goals and dreams in retirement. To make sure you have everything figured out, you may want to work with a financial advisor who can help you determine a budget and a retirement income plan that fits your needs and desires.