As nearly 80 million baby boomers age into retirement, the oft-asked question of “will I have enough” naturally segues into “how can I stretch out what I’ve saved.” When expectations aren’t matching reality, though, your investor retirement strategy may need an overhaul.
A mismatch is what many Americans now face and its impacting when they retire and their quality of life post-retirement. About half (51%) of Americans expect they’ll be financially comfortable in retirement, according to a new report by Gallup. That’s the good news. The bad news is almost the same number of Americans (46%) believe financial comfort in retirement may be out of reach. That number, 46%, is up significantly from 32% in 2002.
Among private sector workers, a recent AARP survey revealed the number of folks anxious about having enough money to live comfortably in retirement is even higher at 74%.
Pegged to forecasts
Why is confidence waning? According to the 2018 Retirement Confidence Survey, most retirees never calculated the medical costs they could incur in retirement and some are losing confidence in programs that could help offset those costs, including Social Security and Medicare. In addition, 40% of current retirees that responded to the survey are finding that healthcare expenses are higher than expected.
The increasing costs of drugs, healthcare, and long-term care can be staggering in retirement. The latest projections tell us that the typical 65-year old man today will spend $189,687 on healthcare expenses in retirement, while the typical 65-year-old woman will spend $214,565. And these figures don’t include long-term care like nursing home expenses (CNN).
Increasing your confidence
Follow a financial plan. If you don’t have a financial plan, get one. Make it a priority to review your plan each year, especially in retirement, to make sure you are on track with projected cash flow.
Update financial needs in retirement. Even if you began early to save, the rapid rise in healthcare costs alone should prompt you to take another look at retirement calculators and your portfolio in case adjusted forecasts or additional strategies should be folded into your plan.
Protect your portfolio. Plan for broader costs that can cut into your portfolio’s growth, including taxes, inflation and long-term care. Check out tools that can offset the drag, like fixed-income or income-focused investments. Decide whether you are going to self-fund potentially major healthcare expenses or invest in long-term care insurance.
Preserve principle. Once in retirement, maintain a safety level of liquidity to absorb surprises like home repairs and emergencies in order to preserve investment principle and income derived from your investment portfolio.
Plan for work. An increasing number of Americans are working longer. U.S. seniors are employed at the highest rates in 55 years. Almost 19% of people 65 or older were working at least part-time in the second quarter of 2017, according to the U.S. jobs report. Should you choose to work longer, this too requires planning ahead because your Social Security benefits, health insurance and tax bracket may be affected the longer you stay in the workforce.
For most of our clients, retirement is the summit; a point in life where you redefine your financial needs as you enter the next chapter of your life. But getting there without the safety nets of the past requires a customized plan that reflects your specific retirement dreams and objectives as well as changes in the assumptions your retirement strategy is based on.
Want to take another look? Schedule time with your Wambolt advisor to review your retirement strategy.