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United States : Lincoln Financial Survey Finds Retirees Underestimate The Impact Of Taxes On Retirement

June 7, 2014

Retirees significantly underestimated the impact taxes would have on them during retirement years, according to a recent Lincoln Financial Group Survey. The Survey, "2013 Expense Challenges of Age 62-75 Retirees," is based on interviews with 750 individuals, with an annual household income of $100,000 or more, and was developed to better understand how individuals plan and manage living expenses and taxes before and during retirement. The survey has a margin of error of +/- 3.5 percent.

The majority of retirees surveyed anticipated home and mortgage, healthcare and travel/leisure to be the most significant expenses during retirement, when they were asked what they expected their top expenses to be before they retired. However, these retirees found that their actual top expenses included taxes, rather than healthcare.

"Given the current environment, with taxes at a 30-year high, it is critical that advisors help their clients understand all factors including taxes when developing a plan to help clients protect their legacies," said Richard Aneser, Chief Marketing Officer, Lincoln Financial Group Distribution. "Advisors who offer this type of wealth protection expertise will demonstrate their value and unique understanding of their clients' needs."

On average, when reviewing all household expenses paid on an annual basis, retirees reported spending the most on federal income tax. Additionally, 36 percent of retirees said taxes were a larger expense than they had anticipated, while 23 percent didn't even consider planning for taxes as an expense prior to retirement.

Underestimating the role of taxes was not based on a lack of knowledge among those responding to Lincoln's study, which was conducted late last year. When participants were asked if they were aware of recent tax law changes, 62 percent said they were, while only 16 percent were unaware of tax law changes. Encouragingly, 57 percent of survey participants said their advisor regularly discussed tax changes with them and shared the impact those changes could have on retirement. However, 43 percent said their advisor did not take that initiative.

"Retirement is more of a mindset than a specific age," said Christopher Price, Advanced Sales Attorney for Lincoln Financial Distributors. "Financial advisors need to have the retirement conversation with their clients early on during regularly scheduled portfolio reviews. Those reviews should include identifying tax-control options and strategies to help mitigate the impact of taxes on the client portfolio."

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Source: TendersInfo (India)

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