Retirement Facts

New York Yankees catcher Yogi Berra once said about planning If you don’t know where you’re going, you’ll end up someplace else. Yogi was a master of unintended humor, but he sure was right about planning. And planning for retirement is hard if you don’t have all the facts. We’ve got several for you today. You work hard all your life, so you don’t want your retirement day to roll around and find you’re someplace else. Having all the facts is critical if you want to avoid surprises, and better to have the facts now while you can still make needed adjustments to your financial plan. IMPORTANT FACTS ABOUT RETIREMENT PLANNING 1. PEOPLE ARE LIVING LONGER THESE DAYS: Our first fact is certainly good news. The odds are you’ll probably live longer than you think. But unfortunately, that will also likely put more strain on your retirement savings. You may have heard that the average life expectancy is around 79. But that’s the average for all age groups combined, and that makes the figure somewhat misleading. Among those who make it to age 65 (and 70-percent of us will live at least that long) Half of women reaching that age are expected to live to at least 87, and half of men reaching 65 will live to 84 years of age. That means younger workers should plan for 20-years or more of income in retirement. And those folks currently retired who may have all of their assets in fixed income securities should move some of it (20-30%) into index or mutual funds to offset inflation. This helps reduce the risk of running out of retirement savings someday. 2. SOCIAL SECURITY ALONE WON’T CUT IT: Social Security won’t come close to meeting your income needs in retirement. Financial advisors recommend having a retirement income of around 75-80% of your working income. Social Security was never intended to do that. At most, you can depend on Social Security for around 40% of the income you’ll need in retirement. The solution, again, is to increase your retirement holdings. The sooner you do it, the easier it is, because of compound earnings. 3. MOST AMERICANS AREN’T SAVING ENOUGH: Our next retirement fact is that most Americans aren’t saving enough for retirement. The median retirement savings for Americans aged 55 to 64 is only $107,000. If that seems like a lot you may be disappointed. You can only safely withdraw 4% of that a year or you’ll begin drawing down the principal of your retirement holdings. That amounts to just $350 a month, which is not much of a supplement to Social Security. And remember, $107,000 was the median savings. That means half of workers approaching retirement have less than that. There was a time when pensions were commonplace. Social Security was really designed back in the 1930s for folks who didn’t have a pension. Today, the vast majority of workers don’t have that benefit, and for those that do, the median annual payout is just over $9,000 a year. That means most workers absolutely must have a defined-contribution plan like a 401k or IRA. But according to a report by Vanguard, a third of American workers have no workplace retirement plan. The solution is obvious: if you’re not saving in a qualified retirement plan, open one and start today. All of this leads us to our next fact about retirement 4. MANY AMERICANS ARE WORKING LONGER: Since so many these days are financially unprepared for retirement, many are staying in the workforce well after they reach Social Security eligibility. Bloomberg reports that nearly 20% of people 65 and older are still working full or part time. The Bureau of Labor statistics puts the actual number of those workers at around 10 million. One out of five workers of all ages say they’ll never be able to retire. 5. MEDICARE WON’T COVER ALL HEALTHCARE NEEDS: A lot of folks think that once they reach age 65, Medicare will cover all of their healthcare needs. It won’t. For example, Medicare doesn’t cover most assisted living expenses. And studies show that around 70% of those reaching 65 will need long term care, which could run more than $4000 a month. Medicare covers only the first 100 days of care at a skilled nursing facility, and only then if it results from a hospital stay of three days or more. The solution there is long term care insurance, which, as you probably know, can be quite expensive. The best time to buy it is in your mid 50’s, and you want to get the longest term offered. On today’s program, Rob also answers listener questions: ● How do you go about wisely helping an acquaintance who is homeless? ● How can you work though the challenges of helping an aging parent who can’t live alone much longer? ● Is now the right time for you to buy a house? How do you determine that? RESOURCES MENTIONED: ● Bankrate.com Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app. To support this ministry financially, visit: https://www.oneplace.com/donate/1085/29