Preparing for a financially sound retirement is not something that happens overnight. It takes decades of proactive saving, smart investing and weighing your tolerance for potential risk. However, even with the most careful planning, there are still certain barriers to retirement that inevitably exist. Here, we’ll look at four of these barriers and address how you can go about breaking them down.
- Social Security dwindling. Though the average 2017 monthly Social Security benefit of $1,342 is not enough for most people to live on alone, Social Security does help significantly as a source of supplemental income in retirement. However, impending changes to Social Security, including the fact that the trust funds funding it are poised to run out by 2034, could change the way you prepare for retirement. In general, today’s younger generations readying for retirement should not rely on or expect the government’s help. Plan for retirement as if Social Security was not a factor, because eventually it may not be. For those who are already close to retirement, anticipate the fact that your Social Security benefits could decrease in the near future.
- Historically low interest rates. Low interest rates benefit younger investors looking to borrow at lower costs, but for those approaching retirement, this trend is not as appealing. That is because older investors cashing in bonds, CDs and money market investments are forced to accept lower returns, and some end up turning to high-risk stocks to offset the low returns. Instead, keep bonds and CDs short-term. That way, you can reinvest at a higher rate when interest rates go up.
- Longer life expectancies. People today are living longer than they ever have before, which means they need to plan for longer retirements. While it’s true that no one knows his or her life expectancy, it is better to be over prepared than under prepared. Make sure your cash savings are stocked so that you do not have to tap into your portfolio (which has time to grow in a hypothetically longer retirement) in the event that the market takes a dive. You should also consider long-term care insurance as a part of your longevity planning.
- Health insurance expenses. Another among the barriers to retirement facing today’s investors is high health insurance costs. When you stop working full time, you typically no longer have access to your employer-sponsored health insurance, which means you will either have to rely on Medicare (if you are 65 and older) or the Health Insurance Marketplace if you retire younger than 65. That being said, consider working at least part time to take advantage of your employer health insurance until you are eligible for Medicare in order to offset costs of obtaining health insurance independently. Fidelity estimated that a healthy 65-year-old couple retiring in 2017 would need $275,000 to cover their health care costs in retirement. Make sure you have set aside adequate money to cover healthcare costs throughout retirement, and do what you can to stay healthy on a daily basis.
Despite certain barriers to retirement that threaten to hinder investors, there are ways to overcome those barriers to set yourself up for the successful retirement that you worked hard your entire life to achieve.
Stay tuned to Ty J. Young Inc.’s Retirement You Earned blog for more insight into life in your retirement years. To learn how you can maximize the amount of income you receive in retirement, call our knowledgeable Ty J. Young Inc. advisors today at 877-912-1919.