You may have set your retirement savings goal years ago,but have you taken a second look at that number lately? Even if you’re on track to meet that goal, you should still reevaluate your plans every few years. It can be easy to grow complacent about retirement savings, especially if you watched your parents or grandparents retire effortlessly. But today, we all face very different circumstances, so keep the following four trends in mind as you plan for retirement.
You will live longer than your parents. Just half a century ago, the average life expectancy was 68 years old. But today, the average retiree can expect to live to 79… and that number is growing. The good news is that you will probably enjoy a long retirement. The “bad” news is that you also have to fund retirement for a much longer time.
Most people don’t have a pension. Your parents’ employers probably offered a pension plan, and your parents retired on guaranteed lifetime income. But because pension plans are becoming less and less popular in the United State, with many companies phasing them out or discontinuing them entirely, you probably can’t count on a pension in retirement. Instead, you might be offered a 401(k) plan, which is a great option, but places more of the responsibility for retirement planning directly on your shoulders.
The cost of healthcare is rising. Over the past two decades, the cost of health care has steadily increased at two to three times the general inflation rate. For example, right now the inflation rate is near zero, and yet health care costs still increase by 2 to 4 percent each year! Medicare won’t cover all of your bills, and supplemental insurance will only go so far. You will still pay out of pocket for some services and medications, and planning for inflation still doesn’t cover the cost of health care.
Social Security regulations have changed. Years ago, most people didn’t pay taxes on Social Security benefits. But today, that situation is commonplace. Full retirement age has also been redefined by the Administration, so you will wait a bit longer to receive your benefits. If you need to stop working before reaching your full retirement age, you will need a consistent form of income.
As you can see, the overall picture of retirement has changed rapidly from one generation to the next. You need to plan carefully, and reevaluate that plan every few years as conditions evolve. Schedule a meeting with us, and we will review your plan and help you to make any necessary changes.
Portions of this article have been excerpted from “6 Reasons You Need More Money for Retirement” by Tom Sightings, U.S. News. Tom Sightings is not affiliated with LPL Financial.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.