Worried about your ability to afford retirement? You’re not alone. According to Gallup’s 2017 survey on Americans’ financial worries, 54 percent of those surveyed said they were concerned about not having enough money for retirement. That number is large enough to make retirement America’s No. 1 financial concern.1
Much of the stress surrounding retirement comes from the unknown. There are many variables and factors in retirement that are impossible to predict. You can’t know how long you will live or how long your retirement might last. You can’t know in advance what kind of health issues you may face. And it’s impossible to predict how economic factors could impact your retirement.
There was a time when retirees could count on guaranteed lifetime income from Social Security and an employer pension to fund their golden years. Those days are long gone, though. While today’s retirees still enjoy Social Security income, very few have access to a pension. In 1998 nearly 60 percent of Fortune 500 companies offered a pension. As of 2015 fewer than 20 percent offer one.1
Still, there are some employers that offer their employees pensions, also known as defined-benefit plans. The 401(k) is the standard when it comes to retirement benefits, but the defined-benefit plan hasn’t gone totally extinct yet.
You’re probably aware of the risk posed to retirees by long-term care, which is extended assistance with daily living activities such as eating, mobility and bathing. Long-term care is often provided either in a facility or in the home, and it is usually very costly.
AARP recently published a report on the current state of long-term care. Specifically, it ranked each state by the quality and affordability of care available to seniors. While the scores and information vary by state, there is some information that’s applicable to all retirees, regardless of where they live.
According to AARP, more than half of all people turning 65 today will require long-term care at some point in the future. The report also estimates that care provided in a nursing home can cost more than $90,000 per year, while in-home care costs north of $30,000 annually.1
Have you developed a strategy to manage the biggest financial risks you could face in retirement? If so, you may have an emergency fund to cover unexpected costs, a strategy to minimize market risk, and possibly a plan to cover health care and long-term care costs. Maybe you even have a tax management plan.
There’s one risk, though, that many retirees overlook. It’s inflation, which is the regular, gradual increase in the price of goods and services. Inflation is a natural part of the economy. It’s driven by a broad range of factors including labor and material costs, interest rates, and overall economic conditions.
Do you have a retirement savings gap? While you may be feeling some stress about your retirement outlook, you certainly aren’t alone. According to Gallup’s 2017 study of financial concerns, more than half of all Americans are worried about their ability to pay for retirement.1
If you’re behind on your retirement planning, the simple solution is usually to save more money. Conventional wisdom is to increase your contributions to your 401(k) or IRA. However, that may not be possible. After all, there’s only so much money you can put away for the future. You still have to cover current bills and expenses.
Does a significant portion of your retirement assets exist within your 401(k) plan? If so, you’re not alone. Many workers use their 401(k) as their primary retirement-saving vehicle for a number of reasons. You get tax-deferred growth inside a 401(k) plan. You also may get matching contributions from your employer. Those two components can make a 401(k) a powerful accumulation vehicle.
Retirement isn’t only about asset accumulation, though. You certainly need to save a substantial amount of money to fund a long retirement. However, you also need to make that money last. Your retirement could last several decades. If you aren’t disciplined with your spending and money management, your 401(k) funds may not last the long haul.
How confident are you that you will have enough income and assets to support a comfortable and enjoyable retirement? If you’re like many Americans, you may not be completely confident. According to a 2016 study from the Employee Benefit Research Institute, only 21 percent of Americans say they’re “very confident” that they will have enough money to live comfortably through their retirement years.1
That lack of confidence could stem from a number of issues. Many workers may still be feeling the effects of the recession of 2008-09. Others may be suffering from the reduction in pension programs offered by employers. And many people could simply be behind on their retirement savings efforts.
As you approach retirement and the later stages of your life, you may be considering your legacy and how you will pass your assets on to your loved ones. Perhaps you want to fund your grandchildren’s education or help your grown children get started on their retirement nest egg. Maybe you have assets that hold sentimental value that you would like to distribute to specific relatives.
To achieve these goals, it’s helpful to have an estate plan in place. Your estate plan should prioritize your objectives and offer a strategy. It should also identify risks and challenges, such as taxes, end-of-life costs and even probate expenses.
Any solid financial plan is built on a foundation of risk protection. It’s difficult to reach your financial goals if you are vulnerable to risk. It takes only one sizable threat or unexpected event to create a financial crisis and throw your planning off track.
You probably have various types of insurance to minimize your risk exposure. For example, you may have health insurance, life insurance, homeowners insurance and more. If you’re like many Americans, however, you may not be protected against one significant risk—disability.
Are you recently retired or nearing retirement? If so, you may believe that a financial plan isn’t necessary at this stage of life. After all, retirement planning is a major component in most financial plans. If you’ve already achieved your retirement goals, do you still need a plan?
The truth is that retirement planning is just one piece of a comprehensive financial plan. Even after you retire, you will still have other financial objectives, challenges, and needs. You’ll need to make your retirement assets last through your lifetime. You may have legacy goals on how your estate is distributed after your death. You will likely face health care costs and other financial risks. A comprehensive financial plan can help you tackle these issues.