Financial Advisor: Are you prepared for retirement
People are living longer than ever before, which has implications for retirement planning. Retirees who have not adequately planned for a longer lifespan may find themselves running out of money.
Life expectancy is a key factor in retirement planning. The higher your life expectancy, the more money you will need to save.
According to the Social Security Administration, the average life expectancy for men who reach 65 is 82. For women, it is 85. This means that you could potentially spend 20 or more years in retirement.
Given the reality of increased longevity, retirement planning strategies must adapt. Here are some key considerations to help ensure financial stability throughout your golden years.
Saving Early
Retirement planning is more important than ever, as people are living longer and longer. The average life expectancy in the United States is now 78.6 years, and it is expected to continue to rise. This means that you could potentially spend 20 or more years in retirement.
To make sure that you have enough money to live comfortably in retirement, it is important to start saving early. The earlier you start, the more time your money has to grow. Even if you can only save a small amount each month, it will add up over time.
When you are creating a retirement plan, it is important to take inflation and possible medical expenses into account. Inflation is the rate at which prices rise over time, and it can erode the value of your savings. Medical expenses can also be a major expense in retirement, especially if you need long-term care.
It is also important to avoid simple "rules of thumb" when it comes to retirement savings. These rules may not be accurate for your individual situation. Instead, it is important to work with a financial advisor to create a plan that is tailored to your needs.
A financial advisor can assist with your money situation, retirement savings, and selecting investments for your portfolio. They can also help you stay on track with your retirement savings and adjust your plan as needed.
To have a secure retirement, start planning early and get help from a financial advisor. Here are some additional tips for saving for retirement:
Contribute to your employer-sponsored retirement plan. Many employers offer matching contributions, which means that they will match a portion of your contributions up to a certain amount. This is a free way to increase your savings.
Open an individual retirement account (IRA). IRAs offer tax advantages that can help your money grow faster. You can contribute to an IRA even if you have an employer-sponsored retirement plan.
Invest your money wisely. Choose investments that suit you and can increase your money in the long run. Many options are available, so choose wisely.
Review your retirement plan regularly. Review and adjust your retirement plan regularly as your financial situation may change over time.
By following these tips, you can increase your chances of having a financially secure retirement.
Delaying Social Security
If you expect to live a longer life, you may want to consider postponing the start of your Social Security benefits. This is because your benefits will increase by 8% for every year you delay taking them, up to age 70. After age 70, there is no further increase.
To determine how much your benefits will increase by delaying, you can use your real income records. Your real income is the amount of money you earned after inflation has been taken into consideration. You can find your real income records on your Social Security Statement.
For example, let's say your full retirement age is 67 and your real income is $50,000. If you delay taking benefits until age 70, your monthly benefit will be $1,200 ($50,000 * 1.08^3). If you take benefits at age 67, your monthly benefit will be $1,000 ($50,000 * 1.08^2).
As you can see, by delaying your benefits until age 70, you will receive an additional $200 per month. This means that you will receive $24,000 more in benefits over the course of your lifetime.
Of course, there are some factors to consider when deciding whether to postpone Social Security benefits. For example, you will need to make sure that you have enough money to live on until you begin receiving benefits. You will also need to consider your health and whether you think you will be able to work until age 70.
Delaying Social Security benefits is a smart way to boost your benefits and towards having enough money for retirement. This is especially true if you're in good health and can afford to wait. Here are some additional things to keep in mind when deciding whether to postpone Social Security benefits:
Your health. If you are in good health, you may be able to work longer and delay taking benefits. However, if you have health problems, you may need to start taking benefits earlier.
Your financial situation. If you have enough money saved for retirement, you may be able to afford to delay taking benefits. However, if you have limited savings, you may need to start taking benefits earlier.
Your personal preferences. Some people start getting benefits early, while others wait to get more money each month. Ultimately, the decision of whether to postpone Social Security benefits is a personal one.
If you're not sure about delaying Social Security benefits, it's wise to consult a financial advisor. They can help you assess your individual situation and make the best decision for you.
Catch-Up Contributions
As you get closer to retirement, it is important to make sure that you have enough money saved. One way to do this is to take advantage of catch-up contributions.
Older savers can make extra contributions to retirement accounts like 401(k)s and IRAs. These are called catch-up contributions. These contributions allow you to save more money for retirement without exceeding the IRS limits.
For example, in 2023, the maximum contribution to a 401(k) is $22,500. However, if you are age 50 or older, you can make an additional catch-up contribution of $7,500. This means that you can contribute a total of $30,000 to your 401(k) in 2023.
Catch-up contributions can be a great way to boost your retirement savings. If you are able to make them, you will be well on your way to a comfortable retirement.
Here are some of the benefits of catch-up contributions:
They allow you to save more money for retirement.
They can help you reach your retirement savings goals sooner.
They can help you reduce your taxable income.
They can help you grow your retirement savings faster.
If you are eligible for catch-up contributions, it is a good idea to take advantage of them. They can be a valuable tool for helping you reach your retirement savings goals.
Here are some things to keep in mind when considering catch-up contributions:
You must be age 50 or older to make catch-up contributions.
You can only make catch-up contributions to tax-advantaged retirement accounts, such as 401(k)s and IRAs.
You cannot make catch-up contributions to non-tax-advantaged retirement accounts, such as taxable brokerage accounts.
You must have earned income to make catch-up contributions.
If you are not sure if you are eligible for catch-up contributions, you should talk to your financial advisor.
Delaying Retirement
Postponing retirement is one way to account for a longer lifespan. By working a few more years, you can give your retirement savings more time to grow. This can make a big difference, especially if you are expecting to live a long life.
Here are some of the benefits of postponing retirement:
You can make additional contributions to your retirement savings. This will give your money more time to grow.
You can avoid withdrawals from your retirement savings. This will help your money grow even faster.
Your retirement savings will have more time to compound. This means that your money will earn interest on interest, which can lead to significant growth over time.
Of course, there are also some potential drawbacks to postponing retirement. For example, you may miss out on some of the benefits of retirement, such as travel and leisure time. You may also find it difficult to find a job after you reach your full retirement age.
Ultimately, the decision of whether to postpone retirement is a personal one. You should weigh the benefits and drawbacks carefully and decide what is best for you.
Phasing into Retirement
Some people choose to transition into part-time work after retirement. This can be a good way to supplement income, stay active, and keep their minds sharp.
The best type of part-time work for a retiree will depend on their interests, skills, and financial needs.
For example, a music enthusiast might enjoy working in a record store or teaching music lessons. Someone who is passionate about helping others might enjoy volunteering at a local soup kitchen or homeless shelter. And someone who is looking to make a little extra money might enjoy freelancing or consulting.
It is also important to consider the financial implications of part-time work. If you get Social Security benefits, you might have to earn less or work less to not impact your benefits.
If you are considering part-time work after retirement, it is a good idea to talk to a financial advisor. They can help you assess your individual situation and make the best decision for you.
Planning for Healthcare Needs
As people live longer, they are more likely to need long-term care, such as nursing home care. Long-term care can be very expensive, so it is important to plan for it.
There are a few different ways to plan for long-term care. One way is to purchase long-term care insurance. Long-term care insurance can help pay for the cost of care, but it can be expensive.
Another way to plan for long-term care is to save money in a dedicated account. This could be a savings account, a health savings account (HSA), or a long-term care savings plan. You can also consider working with a financial advisor to create a long-term care plan that meets your individual needs.
In addition to long-term care, it is also important to plan for other medical expenses in retirement. These expenses can include prescription drugs, doctor's visits, and hospitalization.
There are a few different ways to plan for medical expenses. One way is to purchase health insurance. Health insurance can help pay for the cost of medical care, but it can be expensive.
Another way to plan for medical expenses is to save money in a dedicated account. This could be a savings account, an HSA, or a health savings plan.
You can also consider working with a financial advisor to create a medical expense plan that meets your individual needs.
Planning for long-term care and medical expenses is an important part of longevity planning. Plan ahead to have the things you need to take care of yourself when necessary.
Adjusting Investment Strategy
As you near retirement, it is important to adjust your asset allocation to reflect your changing needs and goals. Typically, this means shifting from riskier to more conservative investments. If you plan to live for 30 or more years after retiring, you may need to invest in growth-oriented assets. This will help ensure that your savings can cover living expenses and healthcare costs.
Here are some factors to consider when adjusting your asset allocation for retirement:
Your risk tolerance. How much risk are you comfortable taking with your retirement savings?
Your time horizon. How long do you expect to have your retirement savings?
Your expected retirement income. How much money do you expect to receive from Social Security, pensions, and other sources?
Your expected expenses. How much money do you expect to spend in retirement?
Your investment goals. What are your goals for your retirement savings? Do you want to leave a legacy to your heirs?
Once you have considered these factors, you can start to adjust your asset allocation. A financial advisor can help you create an asset allocation that is right for you.
Bottom Line
Longevity is a gift, but it also presents some challenges. One of the biggest challenges is financial. If you live longer than expected, you may not have enough money saved to support yourself in retirement.
That's why it's so important to plan for longevity. By planning ahead, you can make sure that you have the financial resources you need to enjoy your retirement years.
Sources:
https://oechsli.com/my-account/us/library/86226/
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These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.
Life Insurance: Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.