Following are some “untruths” about retirement that I’ve
observed over the years.
You will not need as much money
during retirement as you do now. The general rule of thumb says that
you will need approximately 70% of your pre-retirement income in order to
maintain a lifestyle similar to that which you currently have. This may be true
if you live your current lifestyle. However, when you retire, you will have
more free time for travel, leisure activities, hobbies, and other things you
might like to do during your retirement years.
In addition, medical expenses will increase at a faster rate
than they likely did during your pre-retirement years. Also, your overall tax
rate may not drop very much.
My retirement years won’t last
all that long. The fact is, today individuals in their 50s and 60s are
generally healthier than previous generations. Currently, if you are age 65
your life expectancy is approximately 21 years, which is a long time to plan
for. And you may live longer than you may think. (Remember: for planning
purposes, a "life expectancy" of 21 years means
you have a 50% chance of dying by year 21-and a 50% chance of living longer).
Social Security will provide
enough income for my retirement years. Wrong! The fact is that Social
Security accounts for approximately 38% of the average retiree’s income.
Although increases in benefits have occurred and may continue to occur, it is
likely they may become less generous than they have in the past.
Also, the age that you must reach in order to receive full
retirement benefits is increasing over the next few years. So, it’s becoming
ever more important for you to accumulate your own funds in addition to
whatever the government programs can provide. Social Security should be
considered a supplemental benefit to your retirement financial planning and not
the foundation on which it should be built.
Medicare will take care of my
health insurance. Typically, Medicare pays less than half of a retiree’s medical
bills, and you usually cannot start collecting this until age 65. In addition,
many employers are cutting back on medical coverage for retirees due to the
cost. You’ll need to look at and plan for the costs involved for your health
insurance during the retirement years and consider Medicare supplements and
possibly long-term care insurance coverage. These are costs that many current
workers never had, or incurred minimally, during their working years but which
will be a major part of their annual budget in retirement.
Money is everything when it
comes to retirement planning. Nothing could be further from the
truth! While money is important, it’s the lifestyle decisions that are really
the most important concerns for your retirement years. Money is significant in
that it’s needed in order to finance the lifestyle decisions you make. For that
reason, it’s important to plan as early as possible for funding the lifestyle
you would like to lead.
Financial Advisor with Coastal Wealth Management, LLC, 10441 Racetrack Rd, Unit
1, Berlin, MD, 21811 and specializes in Wealth and Retirement Income Planning.
He can be reached at 410-208-4545 or firstname.lastname@example.org. Registered Representative, Securities offered through Cambridge
Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory
services offered through Cambridge Investment Research Advisors, Inc., a Registered
Investment Advisor. Coastal Wealth Management LLC & Cambridge are not