Here are the Biggest Money Mistakes Assurant Retirees Should Avoid

In a world of fluctuating economies and rapidly changing lifestyles, a significant number of Assurant professionals express unease about financial decisions made during their tenure in Assurant companies. From the lessons drawn from discussions with the Financial Planning Association and the Alliance of Comprehensive Planners, several themes emerge.

1. The Timing of Social Security Benefits  Statistics reveal that approximately 33% of Social Security recipients opt for benefits as early as the age of 62. While it might seem an attractive proposition, there is an underlying drawback. Benefits accrue by a substantial 5% to 8% annually when there's a delay in application. Initiating early not only deprives one of these benefits but can also impact the survivor benefit entitled to a spouse after the other's demise.

Delia Fernandez, a renowned CFP from Los Alamitos, California, often hears about individuals deciding to start early with an intention to save or invest these benefits. However, the returns on these investments hardly ever match what Social Security would offer with a delay. “The reflection often is of regret and a realization of the potential income they missed out on,” Fernandez observes.

2. The Underestimated Power of Roth IRA  While many Assurant workers opt for deductible contributions to 401(k)s, IRAs, and other retirement plans to enjoy reduced tax bills during service years, it's essential to consider the other side of the coin. The money will eventually need withdrawal, due to mandated minimum distribution rules, and it then faces taxation as income.

In certain scenarios, these compulsory disbursements might propel diligent savers into heftier tax brackets. Additionally, this can result in an increased taxable portion of their Social Security benefits and augmented Medicare premiums. Thus, financial planners consistently emphasize the wisdom of allocating some savings to Roth accounts. These might not offer immediate deductions but guarantee tax-free withdrawals, offering a strategic way to handle tax implications post-retirement.

3. The Surprise Called IRMAA  Navigating the waters of Medicare can be daunting for Assurant workers. Many Assurant professionals, used to employer-facilitated health coverage, find themselves unprepared for the out-of-pocket expenditures post-retirement. Beyond the usual deductibles and co-pays, Medicare also demands premiums. This, combined with the added costs due to the Income-Related Monthly Adjustment Amount (IRMAA), can inflate expenses.

In 2020, the standard premium for Medicare Part B stood at $144.60 monthly. However, for those with a modified adjusted gross income surpassing $87,000 (singles) or $174,000 (married couples), IRMAA can amplify this by $57.80 to $347 per person every month. A considerable 3.5 million Part B and 2.5 million Part D beneficiaries felt the impact in 2017.

4. The Relevance of Stock Market Investments  The unpredictability of stock markets often deters potential investors. However, equities remain the sole investment avenue consistently ahead of inflation. Marc B. Schindler, a CFP from Bellaire, Texas, argues that in specific scenarios, a retiree's ability to undertake risks can surpass their younger counterparts. Especially when fixed expenses are secure via guaranteed sources like pensions and Social Security, retirees might be well-positioned to optimize their portfolios, hence enhancing potential returns.

5. The Imperative of a Comprehensive Plan  One cannot overemphasize the importance of a holistic financial strategy for Assurant workers. Matt Wilson, a CFP from Overland Park, Kansas, shares an anecdote of a couple with substantial investments, but an absence of a cohesive plan, leading to undue stress and anxiety. A trusted, fiduciary financial planner who prioritizes client interests can be invaluable in establishing sustainable withdrawal rates and a judicious investment approach.

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In addition to the regrets listed, many retirees also express remorse over not diversifying their investments. While many professionals often allocate a significant portion of their savings in company stocks, relying heavily on these can lead to disproportionate risks. According to a 2019 report by the Employee Benefit Research Institute, roughly 7% of 401(k) plan participants in their 60s had more than 80% of their accounts in company stock. Diversifying investments can better position retirees against unforeseen market downturns and provide a more balanced financial foundation for retirement. 

In conclusion, as retirement looms or begins, professionals must remain vigilant, informed, and proactive in making decisions that ensure security, prosperity, and peace in the golden years of their lives.