Are you planning for your retirement yet? If not, you should be. There's no age that's too young to start making plans for the future, and there's no point at which you're too old and have missed your chance. However, making that plan may be more complicated than you think. Most people have a picture in their minds of what retirement will look like, even if they're not actively planning for it yet. Maybe you expect to retire to Florida or spend your golden years traveling. Or perhaps you're picturing a quiet life in your hometown, with lots of free time to pursue your favorite hobbies. Take a look at some surprising facts that may affect your ability to achieve that retirement dream, and find out what you can do to get on track.
You May Need to Work Longer Than You Expect
At what age were you planning on retiring? It's possible that you could be working for longer than you think. In 2012, a survey showed that 30% of Americans expected to work until the age of 80, and 70% of middle class Americans expected to work during their retirement. Nearly 40% of those that expected to work in retirement expected that they would work out of financial necessity, not personal preference.
The trend of working much later in life isn't being driven by workaholics. It happens because many Americans simply can't afford not to work. If you want a traditional retirement—one where you can stop working in your 60s and spend your senior years enjoying your freedom, spending time with your family, and pursuing your interests—you will need to take a proactive position on retirement planning and aggressively pursue options that will let you save and earn more money. This is the time to learn how to successfully invest and grow your income for the future.
Retirement Costs Aren't One-Size-Fits-All
How much money do you need in order to have the retirement that you want? There are many different guides to retirement out there, and each of them will give you a different number. Figures like $1 million, $2 million, and 10 or 12 times your current annual salary are some common figures that are often suggested. The truth is, the amount of money that you need is highly personal, and depends largely on factors like the cost of living in your area (or the area you plan to retire to), your expenses, and your income.
Rather than just choosing a dollar amount that you need to have reached by retirement age, it makes more sense to add up your expenses, make adjustments for your cost of living changes—which may increase or decrease, depending on how you plan to spend your retirement years—and subtract the income you expect to have, like Social Security payments, pension payments, and stock dividends. The difference between your expenses and projected income should give you an idea of what you'll need to save for a comfortable retirement.
Medical Expenses Are a Wild Card
Healthcare is an obvious concern for retirees—there's a good chance that your medical expenses will go up during your senior years. However, many people don't realize the full extent of the potential burden of healthcare costs because they expect to be able to use Medicare. Unfortunately, what you may not realize is that Medicare does not cover everything.
Just as an example, you may not realize that Medicare doesn't cover most hearing, vision, or dental costs, and it also doesn't cover foot care. These types of things can add up to a lot of money. Many people first begin to have trouble with their vision or hearing in their senior years. Though the number of seniors in America who are missing teeth is decreasing, you need regular dental care if you want to keep those teeth—and if you do lose them, dentures and denture maintenance will cost you as well. One out of four seniors have diabetes, which can lead to foot problems. And it's difficult to predict in advance what health problems you will or won't develop, so it can be hard to predict and plan for these uncovered expenses.
What you can do to keep your health costs manageable during your senior years is to ensure that you get preventative healthcare starting now. Lifestyle changes that you make now can significantly decrease your risk of developing diabetes later. Scrupulously attending dental checkups and having needed dental work done promptly can help you preserve your teeth later in life. However, no matter how careful you are, you should factor in a generous amount of money for handling healthcare costs in retirement—don't just rely on Medicare.
It can be difficult to process all of the facts and figures you need to plan for retirement, but there are technological tools that can help. Financial planning software can be very useful in helping you organize expenses and income, manage savings, and project future income and expenditure. Having access to financial planning software in your own home also allows you to immediately account for changes in your situation, giving you the maximum amount of time to adjust your plans as needed. Consider using financial planning software to help you create a personalized retirement plan that works for you.Share
17 February 2016
After we bought a house, I started realizing that we were going to need to learn to save a little money. We had become pretty laid back about spending because we were so accustomed to making so much extra each month, but with a mortgage, we found ourselves running out of money on a regular basis. I decided to get real about our finances, which is why I set up a financial plan to stick with year round. You wouldn't believe how much of a difference that simple plan made. We went from scraping together money to head to the grocery store to sticking with a rock solid budget.