What Retirement Issues Do Americans Face?
• Higher healthcare costs – As we’ve noted in the past, healthcare expenses are a primary expenditure to account for in any retirement plan. Today, people are living for longer periods of time than ever. Seniors will deal with higher lifetime healthcare costs as they live longer.
In general, healthcare costs are on the rise. Data from HealthView Services shows healthcare costs are increasing 5-7% yearly. For a healthy couple retiring in 2015, HealthView estimated their total lifetime healthcare costs would be around $395,000.
• When to file for Social Security – Social Security benefits are a significant issue for many Americans. Filing at the wrong time can mean as much as tens of thousands of dollars in lost benefits. Needs differ from person to person, whether you’re an individual or you have a partner. With numerous permutations of when you can file on the table, choosing the right strategy is critical – it’s advisable to seek out guidance from a knowledgeable retirement planning specialist for help.
For many people, a waiting strategy may be desirable – an 8% per year increase from full retirement age to when you’re aged 70 is highly beneficial. Other Social Security claiming strategies, such as “file and suspend,” may be an attractive vehicle for married couples to maximize their benefits.
• Having money to enjoy retirement – There are many resources on retirement spending, but these solutions may discuss only withdrawal strategies for financial sustainability. After a lifetime of working hard, seniors want to enjoy their retirement.
A withdrawal plan should enable seniors to do this. It’s important to balance the nightmare of running out of money with avoiding recreational spending due to fears about having a secure, long retirement.
• Maintaining financial well-being in retirement – Of course recreational spending is just one piece of the puzzle. Americans have to account for other factors in their retirement: daily living expenses, long-term care costs, healthcare expenses, the legacy they want to leave, and how to manage all of these components. It’s a balance of monitoring expenses, balancing risk and return potential in your portfolio, and implementing a suitable withdrawal strategy.
As you age, your portfolio will be a primary vehicle for income generation. It should be allocated according to many factors: a suitable level of risk for your current age, cash flow requirements, return needs, and your time horizon, among others. As for withdrawals, it’s worth it to develop a goal for what you’ll need in cash reserves – and then stick to maintaining that goal. Likewise, expenses should be closely monitored, and annual inflation should be accounted for in long-term projections.
• Long-term care requirements – As people age, their need for living assistance or care rises. On the whole, long-term care costs are increasing – along with the population of people who will need these services in their retirement years. It’s important to also account for these needs in your own retirement plan.
Purchasing some form of long-term care insurance may be a suitable solution. Or self-insurance may be ideal if you possess enough assets. Consider discussing these needs with your family, as well as the other parts of your plan for retirement living, as well.