Is retirement still part of the American Dream?
Thankfully, the answer is yes for most of us. But it will require some planning on your part.
A study by the Economic Policy Institute showed that half the people on the cusp of retirement (ages 56 to 61) had a retirement account balance of less than $91,000. At a typical draw-down rate of about 4 percent per year, that equals around $303 a month in retirement income. That probably won’t get you where you want to go.
Slow, Steady Growth
To plan for a comfortable, successful retirement, follow a couple of ground rules. The first is that financial literacy is a lifelong pursuit. Do it right, and financial planning will be downright boring. Plain-vanilla strategies such as regular contributions, slow-and-steady growth and diversification are often most effective over the long term. It’s also important to get advice from trusted, neutral sources.
The second is to understand your future medical expenses. People often assume that Medicare covers everything, but it doesn’t. After the age of 65, the average couple will spend about $260,000 out of pocket on health care — including insurance and nursing home care. The problem is most households don’t have $260,000. That means that many households face the risk of impoverishment or ending up on Medicaid.
Retirement is changing, and planning for it is changing as well. This is no longer your grandparents’ retirement. Life expectancy is changing, and many people go back to work shortly after retiring. They realize that they retired from something, but not to something. Clients should think about what comes next for them.
If you’re wondering about what a comfortable retirement looks like for you, the right financial consultant can help. Specialized software takes into account inflation, taxes and other variables out of your control, and helps optimize retirement planning.
Using this software, a consultant can advise making a few simple changes that will give clients a more accurate value of their future retirement accounts.
