Do you have a retirement plan? A written, formal retirement plan can be a critical tool in helping you meet your goals and manage potential risks. However, a retirement plan is only as good as its underlying assumptions. If your assumptions are faulty, your plan may not accomplish its objectives.
Unfortunately, many retirees may be basing their retirement plans on an assumption that could prove incorrect. According to a survey from the Transamerica Center for Retirement Studies, two-thirds of baby boomers say they are planning on working past age 65. And 15 percent say they don’t plan on ever retiring.1
Why would they plan on delaying their retirement, or scrapping their retirement plans altogether? Some may enjoy working and simply don’t have a desire to stop. According to the Transamerica study, however, two-thirds of those who plan to work past age 65 say they’re doing so for financial reasons. They either haven’t saved enough, need the income or need an employer’s health coverage.1
The problem with this assumption is that retirement age is often beyond one’s control. While you may wish to work as long as possible, there could be external circumstances that force you into retirement. A study from the Employee Benefit Research Institute found that 46 percent of retirees left the workforce earlier than they’d anticipated.2
If you’re planning to work past age 65 to make up for a savings gap, what’s your plan if you are forced into retirement early? You may have to draw on your savings earlier than you would like or file for Social Security at a young age, both of which could create financial challenges later in life.
Still don’t believe you could be forced to retire early? Below are three reasons why many retirees aren’t able to work as long as they would like. If you don’t have a contingency plan for these possibilities, now may be the right time to develop one.
Many people face increased health issues as they age. Unfortunately, it only takes one injury or illness to limit your ability to work. Anything from a back or neck injury to a heart condition to a battle with a serious illness like cancer could be enough to keep you from doing your job.
While Social Security does offer disability benefits, approval can often be difficult. Also, you may find that Social Security disability benefits aren’t enough to support your lifestyle. You can protect yourself with long-term disability insurance, which could continue some or all of your salary until you reach retirement age.
While your job may seem secure today, there’s no guarantee it will always be that way. Businesses and industries can change quickly. There’s always the possibility that your employer may be forced to restructure or cut costs and that your position could be terminated.
There are a few things you can do to minimize this risk. One is to build up a sizable emergency reserve so you can support yourself in the event of a job loss. Another is to continue developing your skills so you’re marketable to employers should you ever get laid off. Finally, you may want to evaluate your budget and look for areas where you could cut back in the event that you are forced to retire early.
If your kids are grown and out of the house, you may think your days of caring for family members are long behind you. That may not be the case, though. If you have elderly parents, you may be forced to care for them as they grow older.
It’s also possible that your spouse might need assistance and that you may be required to provide the care. The U.S. Department of Health and Human Services estimates that 70 percent of all 65-year-olds will need long-term care at some point.3 If your spouse were to require such care, would you be able to do that and continue in your job?
Long-term care insurance is one way to protect against this risk. You pay premiums today for long-term care coverage you can use in the future. Many policies cover care provided either in the home or in a facility.
Does your retirement plan rely on incorrect assumptions? If so, let’s talk about it. Contact us at Baacke Insurance Services. We can help you develop a strategy. Let’s connect soon and start the conversation.
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.
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