There was a time when retirement was fairly simple. Workers stayed with one employer for most of their career. When they decided to retire, they could enjoy a healthy pension from their employer and Social Security benefits from the federal government.
Today’s retirees face a much different set of circumstances. Many employers no longer off pensions. Instead, workers are responsible for funding their own retirement by contributing to 401(k) plans and other accounts. Social Security is still a valuable resource for retirees, but it’s unlikely to fully fund a comfortable retirement.
There are other trends and changes that are creating challenges for future retirees. Below are a few of the biggest. If you haven’t planned for these issues, now may be the time to do so.
Family structures have been changing in America for decades. From 1960 to 2016, the percentage of children who live with married parents dropped from 88% to 69%. ¹ Blended families are on the rise, with more kids living with single parents or step-parents.
These changing dynamics can complicate retirement plans. If you remarry, you may not only add a new spouse, but also new children who need support. You and your new spouse may also have different views on retirement or different approaches to supporting children.
Estate planning can also be a concern in a blended family. You may want to protect your spouse, but also leave a legacy for your children from a previous marriage. It often takes careful planning and delicate conversations to address these issues. A financial professional can help you and your new spouse develop the right strategy for your goals.
The average baby boomer has held nearly 12 jobs in their career. Granted, nearly half of those are between ages 18 and 24. However, that’s still means the average baby boomer held nearly six jobs after age 24.² That’s a far cry from the time when people worked for one employer for nearly their whole career.
A new job usually means a new 401(k) plan, and it may also mean an old 401(k) balance with the former employer. Research suggest that nearly 41% of people cash out their 401(k) plan when they switch jobs. ³ Those cash outs can be costly. They’re taxable and may result in a 10% early distribution penalty.
Changing jobs may be the norm these days but cashing out your 401(k) plan doesn’t have to be. The next time you change jobs, explore all your options, including rolling your plan into an IRA. If you cash out, you may expose your retirement assets to unnecessary taxes and fees.
Rising Health Care Costs
According to Fidelity, the average 65-year-old couple will need approximately $285,000 to pay for medical expenses in retirement. ⁴ Think that number sounds high? Consider the costs of items like premiums, deductibles, and co-pays.
You’ll likely have Medicare coverage in retirement after age 65, but Medicare doesn’t pay for all medical expenses. Your coverage depends on your specific plan. While some plans are robust, others may only cover the basics, like hospitalizations and visits to the doctor.
You can prepare for significant healthcare costs by putting away more money today. You may want to consider a health savings account (HSA), which allows you to grow assets tax-deferred and make tax-free withdrawals for qualified medical expenses.
Today’s retirees are living longer than ever. According to the Society of Actuaries, there’s a 50% chance that one member of a 65-year-old couple will live to at least age 94. There’s a 25% chance that one spouse will live to 98.⁵ If you retire in your mid-60s, your retirement could last 30 years.
Usually, a long lifespan is a good thing. However, it can create some planning issues in retirement. The longer you live, the longer your money has to last. If you spend too much in the early years of retirement, you may not have enough left in the later years.
Fortunately, there are tools you can use to protect yourself and your assets. For example, annuities offer multiple ways to create guaranteed* lifetime income streams. The income lasts as long as you live, regardless of your age or what happens in the financial markets. A financial professional can help you determine if an annuity is right for your strategy.
Ready to tackle the challenges you might face in retirement? Let’s talk about it. Contact us today at Protecting Your Retirement LLC. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. Our telephone number is 913-648-2700.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18768 – 2019/4/11