Take a reality check when you're planning for retirement
By then, you’ll be 65 or 67, whatever age it is that you have determined in your dream world. You have a budget worked out. You have plans to travel or garden or read books. Whatever you’ve planned, have you considered the wrenches that can be thrown into your planning works? Here’s just a few of them to get you thinking about what could go wrong so that everything can go as right as it possibly can.
One thing the Great Recession did was throw nearly everyone off their targets. After much reassessment, many Baby Boomers have decided they’ll work either until 65 or later, never retire or only partially retire. The age that workers believe they will retire has slowly increased since 1991; however the numbers simply don’t pan out. An Employee Benefit Research Institute survey from March 2013 found that 47 percent of American workers retired sooner than they had previously planned. Of those early retirements, 32 percent retired because they had built up retirement savings plans and could afford to do so. More than half of the spectrum (55%) though, retired because of health or disability issues.
Workers who have had solid employment for decades often plan to continue that route right up to retirement but the country’s economic troubles have changed much of that. People who believed their positions would continue have received buyouts or layoffs. Workers who planned that continued employment would support them in their retirement (about 75 percent of workers expect work to play either a major (21%) or a minor (54%) role) are likely to find it difficult to find work.
Retirement savings are supposed to be a three-legged stool, one leg being Social Security, a second leg being savings and the third being pensions. Investopedia, an online resource for investing education, personal finance, market analysis and free trading simulators calls the three-legged stool idea “a retirement terminology from the past” (ouch). Since 2007, an increasing number of retirees have counted on Social Security as a major retirement source of income but Social Security benefits continue to be a major source of interest to those looking to trim the country’s debt.
There’s something to be said about work. It keeps us socially engaged and provides us with a purpose for getting out of bed. Some people won’t experience any problems with continuing to lead a purpose filled life but if you are one of those hoping to catch up with NCIS reruns, work is likely to be healthier for you and help you live longer and better.
Spending too much
Retirement should be less expensive. After all, there’s no need to commute, every day is casual day and your lunch is as close as your fridge. In addition, presumably you’ll have your mortgage paid off, your child out of college and no longer need a new set of “wheels” every few years due to the wear and tear of the commute (see above). But, if you planned to travel the world and didn’t budget the trips in, you’re likely to burn through discretionary and non-discretionary spending faster than planned for.
Not being covered
Uncovered medical expenses can eat through savings and leave you destitute. Nursing homes, unexpected medical emergencies and major dental work are all areas that can deal death blows to retirement plans. Contrary to popular belief, Medicare doesn’t pay for many medical expenses. An acquaintance of mine took a cruise a couple years ago. She and her husband were barely in their 40s, ran marathons and were in amazing health. While onboard, her husband suffered a massive stroke which the ship’s doctor attributed to too much to drink. Precious hours went by as she argued and pressed for care on land. Tens of thousands of dollars in unplanned medical expenses later, they returned to the states, financially devastated.
A solid financial planner with an understanding of how aging issues can impact your retirement savings can help you meet the financial needs of your retirement. Spending time contemplating your retirement goals and formulating plans accordingly can help you build a retirement that will satisfy your health, housing, legal and financial planning needs and keep you on track for experiencing a fulfilling retirement.