While the number of workers who report being confident about their retirement is greater than ever, the number of workers who have actually calculated what they need for retirement is significantly less. While there are many ways people attempt to calculate the number, there isn’t a one-size-fits-all for retirement as each individual has unique factors to consider. So what factors should you consider when evaluating your retirement and making a plan for your future?
The first step in planning for retirement is setting a goal for when you hope to retire. Also, keep in mind that 47% of workers are forced into early retirement, according to the Employee Benefit Research Institute. This percentage is primarily due to either their own health or that of a spouse or family member. Making a plan for retirement should include factoring in unexpected life events like this.
While you can’t predict exactly how long you will spend in retirement, you can make an estimate based on your age, health, and demographic factors such as gender and family history.
FUTURE HEALTH-CARE NEEDS
With healthcare costs increasing eight times as fast as wages and most employers not offering healthcare benefits beyond retirement, healthcare should be a considerable factor in your retirement plans. While retirees qualify for Medicare at age 65, there are still out-of-pocket costs involved, including long-term care, which is not covered by Medicare at all. Long-term care alone can be a significant portion of your medical expenses and should be a substantial factor in your retirement planning.
What do you plan on doing with all that free time? Do you plan on traveling, joining exclusive memberships or clubs, contributing to philanthropic endeavors, or pursuing certain hobbies? Planning for your ideal retirement means planning for the costs involved in what you hope to pursue in retirement.
DEBTWhile the percentage of people saying their retirement has been negatively impacted by debt has gone down, 70% of workers say their debt is negatively impacting their ability to save for retirement in the first place.
With the future of social security shaky, it is more important than ever to create a retirement plan that doesn’t revolve solely on a program that is surrounded by so much uncertainty. While Social Security currently provides the sole income of a reported 40% of American retirees, without significant reform, this may not be an option for generations moving forward.
So you’ve reached what you think is the magic number, only to realize you didn’t accommodate for inflation, and suddenly your retirement has lost significant value. When planned for, inflation is merely a factor of consideration; when not planned for, it can be devastating.
THE GRAND TOTAL
And the grand total is… it depends on what your factors are. The important thing is to come up with a goal, based on these key factors, and then develop a strategy to pursue it.
Often finding your “number” and quantifying your retirement factors can feel like an impossible task without the help of a trusted advisor. If you’re feeling overwhelmed, contact us today to talk with one of our certified financial planners.
-Written by Eric E. Gurholt, CPA/PFS, CFP® | Financial Advisor
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