Retirement, Tax Planning

Expert Interview Series: Retirement author Tom Hegna on Protecting Your Retirement Assets


Thomas Hegna is an author of four books on retirement, and a speaker and economist who has been featured on a nationally syndicated PBS show, Don’t Worry Retire Happy!, which has played in over 50 million homes in the U.S. and Canada.

We recently checked in with Tom to get his advice on retirement planning, the importance of protecting assets during retirement, and how to set up protection plans. Here’s what he shared:

Can you tell us about your professional background? How did you become The Retirement Income Expert?

I have spent nearly 30 years in the Financial Services industry as an advisor, manager, and Senior Executive Officer of a Fortune 100 Company. As a First Vice President for New York Life, I was tasked with focusing the company on the Retirement Income Market. See, for years, everyone focused on the Accumulation of Assets – investing, diversifying, etc. But retirees DON’T retire on Assets – they retire on INCOME! And the distribution of assets is very different than the accumulation of assets.

I learned that retirement is NOT about the stock market or real estate market, it is really about guaranteed lifetime income and taking key retirement risks off the table. This is truly a paradigm shift for most people. I have condensed a large chunk of this considerable knowledge into three books for the U.S. market and one for the Canadian market

What are the most common worries or concerns today’s retirees have about their money?

People are living longer than ever before. The life expectancy of a 65-year-old male is age 86; for a 65-year-old female, it is 89. Here’s an interesting fact: Married people live longer than single people. A couple’s life expectancy is 93. There’s now a 25 percent chance that one spouse will live to be 97! Although everyone wants to live a long life, longevity is not just a risk: it is a risk multiplier of other risks in retirement. The longer you live, the more likely the market will crash; the longer you live the more likely you will withdraw too much money; the longer you live the more likely inflation will decimate your purchasing power; the longer you live the more likely you will need long-term care. To retire successfully, you must take longevity risk off the table and that is a major concern for boomers today.

What strategy do you recommend individuals use when saving for their retirement?

One of the more interesting observations I’ve made is that most public opinion about retirement is focused primarily on asset accumulation or building up savings. Everyone is focused on accumulating their pile of money: How big can I get the pile. But there is very little conversation and discussion about income in retirement.

Once in retirement, you need to cover your basic living expenses with a guaranteed lifetime income. You need to invest the rest of your portfolio to protect against inflation. You MUST have a plan for Long Term Care. Finally, don’t leave your kids any money! I want you to SPEND your money. I want you to leave them Life Insurance because you can do that for pennies on the dollar! By using these products properly, you can get the most for the least.

How can retirees better protect their retirement assets?

First of all, you need to assess all of the risks – longevity risk, market risk, sequence of returns risk, inflation, deflation, long-term care, and death. Each of these risks can be reduced or eliminated by properly using annuities, long-term care insurance, investments, and life insurance.

What are the most common mistakes you see retirees making in regard to their retirement assets?

From what I have seen, most people underestimate how long they are going to live, they overestimate how well the market will do and how much they can withdraw safely. They underestimate the risk of long-term care. They don’t maximize their social security benefits. All of these things result in them living a suboptimal retirement. All of my books focus on having the OPTIMAL retirement. Always get the most for the least! That gives you the very best chance of a happy and successful retirement.

What considerations should individuals be making when creating a retirement plan? What do you find they often overlook?

This may sound simple, but just having a plan is a start. Too many people think they can just “wing it” and be OK. There is too much uncertainty when it comes to future income and expense needs. Most people spend more time planning their yearly vacation than they do planning their retirement. Any successful endeavor has to start with a strong foundation – and a strong foundation begins with a good plan. Start out simple and make sure that retirees can answer these two questions: What do you need your retirement income to do? What do you want your retirement income to do? As surprising as it seems, most retirees can’t answer these questions.

What tools or resources should individuals be using to build a smart retirement plan?

Working with a trusted financial advisor is where retirees should start. Most people wouldn’t do their own dental work in their garage with their drill set so why are people planning their own retirement? Search for a financial advisor based on reputation, pay structure, regulation, and professional designations. Make sure they are up to speed on retirement income, not just wealth accumulation. The financial advisor should be your resource for your retirement planning needs and questions.

What trends or headlines in the world of retirement planning and asset protection are you following today? Why?

The current interest rate environment is something that I’m keeping a close eye on. I don’t think the current environment is as low as people perceive. I’d argue that this is the new interest rate environment and we are very unlikely to see significant increases for years to come. With global government debt, aging demographics, and anticipated government deleveraging, the new interest rate atmosphere is likely to remain stagnant. Don’t believe me? Look at the bond market. As I am writing this, the current 30 Year Treasury Bond Yield is at 3.01 percent. This would indicate that the market believes rates will stay very, very low for a very, very long time.

The current landscape for boomers’ is different than it was for our parents and grandparents. They received guaranteed lifetime income from pensions. You will need to get your guaranteed lifetime income from an insurance company!

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