Questions and Answers on Retirement From Korving & Co.

Korving & Co. authors of Before I Go and Before I Go Workbook  answer reader questions on retirement for Helen’s Page:

From Skeptic:

How much inflation are you projecting, and how would you recommend an investor protect against it, with a substantial lump of cash he recently received? Retirement in 10 to 15 years, depending on health. Kids’ education already covered with 529s. Live in an area where real estate has recently skyrocketed.


That’s a very good question. When we create retirement plans, we use a baseline inflation rate of 2.25% for the length of the plan. That’s based on long term inflation history. During my lifetime, inflation has varied widely, as high as 20% and was negative briefly around 2010. In the 1930s the rate was negative for most of the decade and deflation was the problem.
Inflation is currently above our baseline. With the federal reserve printing money, it could very well go up even further. To quote one of our favorite economists Brian S. Wesbury, Chief Economist for First Trust,    “Here we are in 2021, and the government is paying people not to work, so they can buy things they didn’t produce.”  So how will this end?  To quote another famous economist, Herbert Stein chairman of the Council of Economic Advisers under Richard Nixon and Gerald Ford,   “If something cannot go on forever, it will stop.”  One thing is certain, inflation is a hidden tax on cash and fixed pension income.

Your question regarding your lump sum is hard to answer without knowing you better. Your reference to real estate indicates you may be interested in using that as an investment. If you are interested, educate yourself on both the benefits and the drawbacks of real estate investing. Buying a house is easy. Then comes the hard part.

When we do retirement planning, we make assumptions about a lot of things including inflation and the return on investment. Inflation increases the price of everything, but it usually has a positive effect on salaries, corporate revenue, and nominal interest rates. If inflation picks up that means that your nominal income will also pick up which is also factored into the value of your assets at retirement. The inflation factor will also the increase the inflation adjusted price of your retirement goals.

A good retirement planning program will allow you to change inflation assumptions as well as the base-line assumptions regarding rates of return on various asset classes. Once the retirement plan is completed using the current projections you should be able to see what happens to your plan if the assumptions are wrong. We call this Part of your plan: “what are you afraid of.” Among the things people are typically afraid of are major losses, inflation, social security cuts, low return, living too long, pension cuts and long-term care costs.

Your retirement goal is to retire in 10 to 15 years. That means your plan needs to peer 40 to 50 years into the future because that’s what your actuarial lifetime could be. What a plan will do is to define what your goals are and help define the patterns of behavior are most likely to get you to those goals.


Another question sent in by a reader:

My question would be on the best way to create funding for a trust to pass on after my death. The problem I am facing is that the large bulk of my funds are in qualified i.e. tax deferred vehicles. These would be subject to a sufficient amount of taxes to pull me beneath the minimum ($500,000) amount that is apparently necessary to fund a generational trust. Any way out of this trap?


Thank you for your question. I assume that you are referring to a “generation skipping trust” (GST). As far as I know, there is no lower financial limit to what can be placed in a GST. But the question can best be answered by an estate planning attorney.  Before you see an attorney, I suggest that you define exactly what it is that you want to do. If the object is to pass money to your grandchildren directly instead of your children, you could name them as direct beneficiaries of your qualified retirement accounts. When you pass on, they inherit that portion of these accounts that you specified. They then have the option of taking the money and paying taxes on it or setting up inherited IRA accounts. Be sure to become familiar with the current rules regarding inherited IRA account.  If you have other objectives, provide that information to your estate planning attorney and he will be able to tell you the appropriate way of handling those issues.  Here’s a link that goes into some of the details of the GST:


Reader David Lundeen asks:

For retiring early: how do you handle medical insurance until Medicare kicks in?

I wish there were an easy answer to that, but there is not. I have clients who are in that situation.

From the Medicare website

Medicare is our country’s health insurance program for people age 65 or older. Certain people younger than age 65 can qualify for Medicare too, including those with disabilities and those who have permanent kidney failure.

If you do not qualify for Medicare before age 65 you have several options:
If you have a spouse covered by an employer-paid health plan you can usually get yourself covered in that plan.
Consolidated Omnibus Budget Reconciliation Act (COBRA) provides for coverage for anywhere between 18 and 36 months. You must pay the premiums unless you qualify for COBRA Subsidies in 2021
There are short term plans that that may last up to 12 months, but they do not cover pre-existing conditions and may have high deductibles. You can find them on the internet.
You can buy an individual policy for yourself and your family.
Look into a high deductible plan combined with a Health Savings Account (HSA). The money in an HSA is yours to keep if you do not use it.

You can find out more about Korving & Company at their website here.


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