Bridging the Gap Between Plans and Reality: Know Your Assets

Feb 23, 2017 6:05:00 PM / by Darwin Bayston, CFA

move during retirementThe Employee Benefit Research Institute’s (EBRI) 2016 Retirement Confidence Survey found that the confidence American workers have in their ability to afford a comfortable retirement is remaining stable, with nearly two out of three workers reporting they are very or somewhat confident of having enough money for a comfortable post-career life.

Unfortunately, a 2016 study by the Government Accountability Office found that about half of retirees said they retired earlier than planned because of health problems, changes at their workplace or having to care for a spouse or another family member. “This suggests that many workers may be overestimating their future retirement income and savings,” wrote GAO researchers.


Indeed, there appears to be an unfortunate disconnect between the confidence of financial planning and the reality of life in retirement.



 “EBRI's model does show that a significant percentage of households will run short of money in retirement,” said Jack VanDerhei, EBRI's research director. “This is because we model all the major risks in retirement.”


Many financial advisors suggest that the best way to bridge this gap between your best-laid plans and the reality of living on insufficient retirement funds is to know your assets. For example, you may want to think about selling your house and moving to a smaller home, using the cash proceeds to help pay off unexpected bills. Or you may need to review any stocks and bonds that you own, looking for changes you can make to your investments that might produce income for you now.


One asset that is commonly overlooked by seniors is a life insurance policy. Many seniors are surprised to learn that their life insurance policy is their personal property and they have a right to sell it, just like any other asset.


Take a look at your life insurance policy and evaluate whether it’s still needed or affordable now that you’ve entered the retirement years. Some seniors decide the coverage just isn’t needed anymore because their kids are no longer dependent on Mom and Dad for money. Other seniors have seen their premiums go up in recent years and now find the policy is too costly to maintain.


If you decide you no longer need your life insurance policy, you may be able to unlock hidden value in that policy by selling it to outside investors for a lump-sum cash payment. The sale of a life insurance policy can bring you roughly seven times more money than the cash surrender value of your policy.


It’s good news that American workers are feeling more confident these days about their retirement plans, but it’s sobering to realize that many seniors now in retirement have discovered their plans did not match the reality of their lives. If you’re discovering a gap between what you envisioned for yourself in retirement and what has in fact played out for you, don’t panic. Just take a step back and review your assets. The solution to your retirement funding shortfall may be closer than you think.

Tags: life settlement

Darwin Bayston, CFA

Written by Darwin Bayston, CFA

Darwin Bayston is President and CEO of the Life Insurance Settlement Association (LISA). His charge is to extend the outreach of the Association to all participants of the life settlement industry from consumers to capital providers, including producers, brokers, providers and service providers who are part of the life settlement market. He was previously Managing Director of Life Settlement Consulting & Management (LSCM), founded in 2004 and specialized in life settlement policy and portfolio valuations, and life expectancy analysis. He has published several articles and participated as speaker at a number of life settlement conferences. Previous to that he operated an investment advisory firm. From 1980 to 1993, he served in several capacities, including President and CEO the CFA Institute (and its predecessor organizations). While at CFA, he founded the continuing education program, was editor of the CFA Digest and supervised research projects funded by the Research Foundation of the ICFA. He began his career as an investment analyst with a Midwest life insurance company. Mr. Bayston has been Chairman of the Martha Jefferson Hospital Foundation ($100 million), a member of the Hospital’s Finance Committee and a past member of the Board of the Institute for Quantitative Research and Finance (Q Group).