Planning is very important so that you don’t run out of funds
As a CERTIFIED FINANCIAL PLANNER™ professional, the number one question I am asked repeatedly is ‘will I have enough money to last during retirement?’ According to a Consumer Reports’ 2017 nationally representative Financial Security Survey, 46% of baby boomers (individuals born between 1946 and 1964) are highly confident that Social Security benefits will be there for them when they retire. This means that over half of individuals in the baby boomer age bracket are concerned about Social Security benefits and will they have enough funds to cover their retirement.
I’ve identified a few themes which can help you answer this question:
1. The responsibility for saving for retirement is more up to the individual
Action – Create a retirement income analysis
The evolution of pension plans and the emergence of 401(k) plans have changed the landscape of retirement planning. Forty to fifty years ago, pension plans were a comforting thought for many as they knew exactly how much they would get in retirement because a defined dollar amount or percentage of their salary was set aside. In the early 1980s, defined contribution plans like 401(k) plans emerged allowing employees to make the bulk of the contributions and choosing how to allocate those funds. As they gained popularity, traditional pension plans fell to the wayside as the designated option for companies. The responsibility, therefore, shifted to the individual.
2. People are living longer
Action – Consider costs of medical expenses
The Social Security Administration compiled data recently and reported that a man reaching age 65 today, can expect to live until age 84.0 and a woman turning age 65 today can expect to live, on average, until age 86.5. Knowledge about fitness and health, access to medicine and advancements in medical technology and testing have all helped to contribute to this longevity. Retirees are also more active and living a healthier lifestyle than years ago. Although people are living longer, that doesn’t necessarily correlate to living better. For many individuals, health care is one of the largest expenses one will incur during retirement. Fidelity.com estimates that medical expenses will cost the average couple approximately $285,000 and this number doesn’t even reflect long-term care costs. Variables like where and when you retire, how healthy you are and how long you actually live could potentially impact this estimation.
3. Understand your current financial picture
Action – Meet with a financial advisor to make sure you are on track
You have spent years working and spent a lifetime saving for your upcoming retirement. Navigating the retirement planning process is just as important as the time and energy you spent saving for this time of your life. Challenges like understanding estate planning and making sure you have enough funds to cover Long-Term Care and other medical expenses can be daunting if you haven’t taken the time to meet with a qualified financial expert. Scheduling a face to face consultation with a financial advisor can help eradicate some of the fears you may have. Interview a few different advisors so you find one who shares your financial philosophy. He or she should be able to address any questions you have about “what-ifs” and define some basic strategies as well as find solutions to help you create the retirement path you have envisioned.
‘Will I have enough money during retirement?’ With this being the number one question people ask when approaching retirement, it is very important to be proactive in the years leading up to this stage of life. Understand the costs and implications involved and meet with someone who is more versed in helping you achieve your retirement dreams.