For Mark Roberts’ Use: Many people set a retirement savings goal early in their careers, and diligently save a specific amount of money each year. But even if you’re on track to meet your original goal, you should still re-evaluate your plan on a regular basis. Many of us watched our parents and grandparents retire, and they made it look so easy that we aren’t often concerned about our own retirements. But since we face different circumstances today, keep an eye on these four trends and remember to consider how they will affect your retirement plan.
Your life expectancy is greater. In the mid-1900s, the average life expectancy was 68 years. Now, the average retiree can expect to live to 79 or later. We’re all thrilled to enjoy longer retirements, but that also means you will have to fund that longer retirement!
You probably don’t have a pension. Your parents and grandparents retired easily, probably because their employers offered a pension plan. These plans were popular just a few decades ago, but are becoming less common now. Most companies are switching to a 401(k) plan, which are terrific tax-advantaged methods to save money, but the burden of planning for retirement is placed directly on you.
Healthcare prices are rising. Even though the overall inflation rate has been quite low in recent years, the price of healthcare is rising at two to three times that rate. Contrary to what you might think, Medicare actually won’t cover all of your bills, and supplemental insurance only goes so far. You will still pay out of pocket for many services and medications. Even if you plan for inflation in general, remember that your spending on healthcare will increase more quickly each year.
Congress regularly makes change to Social Security. Your parents probably didn’t pay taxes on their Social Security benefits, but today many people do. The Administration has also changed the definition of “full retirement age” so you will wait a year or two longer to receive your benefits. Changes within the system happen on a regular basis; your benefits will probably still be there once you retire, but you can’t plan on Social Security to fund all of your retirement.
If you established a retirement plan years ago, you should reevaluate that plan to ensure that it will still meet your needs once you retire. You will probably discover that it’s time to bump up your savings rate in order to offset shortfalls in your plan. Give us a call, and we can discuss your goals and help you revamp your plan for the future.