According to a recent Gallup survey, more than half of Americans are worried they won’t have enough money for retirement.1 There may be good reason for concern, especially among baby boomers. A study from the Insured Retirement Institute found that 42 percent of baby boomers have no retirement savings, and of those who do, 38 percent have less than $100,000.2
Are you a baby boomer who feels like you’re not prepared for retirement? The good news is you can still get back on track if you implement a plan and take action. Below are three tips to help you do just that. You may also want to consult with a financial professional to help you develop a customized plan.
Want to retire early? You have company. According to a recent study from MSN, two-thirds of millennials want to retire before age 65.1 That’s well ahead of Social Security’s full retirement age of 67. Retirement is always a challenging goal, no matter your age. Many Americans lack the needed savings to fully retire in their late 60s, let alone early.
Early retirees face a number of difficult challenges. They live longer in retirement, which means they have to fund more years with their savings. They may retire before they qualify for Social Security or Medicare, which means they’re even more reliant on personal assets.
However, it is possible to retire early if you plan ahead, stay disciplined and implement a sound strategy. Below are three simple steps to help you start your planning. You may also want to work with a financial professional to help you analyze your needs and goals and develop a more detailed plan.
You’ve likely been paying into the Medicare system your entire career. If you’re approaching retirement, you’ll soon enjoy the benefits that come from all those payments. Generally, Medicare is available starting at your 65th birthday, although some forms of coverage may be started later.
Medicare was originally implemented to cover hospitalizations. However, other forms of protection have been added over time. Today, Medicare offers a robust menu of options and choices, each of which covers different services and comes with varying premiums, deductibles and copays.
Many new retirees are overwhelmed by Medicare options. However, it’s important to review your choices and analyze your needs. By choosing the right protection package, you can minimize the impact health care has on your retirement assets.
If you’re approaching retirement, it’s likely that you’ll have to plan for a long-term care need at some point in your lifetime. According to the U.S. Department of Health and Human Services, today’s 65-year-olds have a 70 percent chance of needing long-term care.1
Long-term care is extended assistance with basic daily living activities such as mobility and bathing. It’s often provided in a facility, but it can also be offered in the home via a private nurse or home health aide.
Regardless of where care is provided, it’s usually a costly service. According to a 2017 Genworth study, the average cost of a room in an assisted living facility is $3,750 per month. In-home care may actually be more expensive. The average monthly cost of a full-time home health aide is more than $4,000 per month.2 If long-term care is needed over many months or several years, it can become a sizable drain on one’s retirement assets.
One of the biggest expenses you could face in retirement may not even be on your radar. It’s not health care, taxes or even food costs. It’s inflation.
Inflation is the incremental increase in the price of goods and services from year to year. It’s a natural part of the economy. As the economy expands—and wages and earnings increase—so, too, do prices. The inflation rate fluctuates, but there is rarely a year in which prices don’t increase at all.
While modest levels of inflation can be a sign of a healthy economy, they can also be dangerous for retirees. Consider the long-term impact of even a modest inflation rate. An average annual inflation rate of 3 percent would double your cost of living over a 24-year retirement.
Social Security increases benefits annually through a cost-of-living adjustment (COLA). However, this adjustment may not be sufficient for retirees. For example, in 2017 and 2018, COLA was set to 2 percent. In 2016 it was 0.3 percent, and in 2015 there was no COLA.1