Retirement present's its own unique financial challenges. I'm not sure that anyone has actually done the math, but I'd bet that nearly 99% of all the articles on retirement research focus on the dollars and cents issues. Whether it's when to take social security benfefit, or how to build an effective "distribution" strategy for that stage of your life, the bulk of the press focuses on financial management issues. It could well be however, that the "non-financial" are the ones that are most likely to sidetrack you during retirement years.
Here's an example; according to the Society of Actuaries most recent report, 4 out of 10 people retire before they actually had planned on it, either because of their own health issues, job loss or having to take care of an ill or aging parent. Are you prepared if this turns out to be your retirement surprise?
Healthcare costs continue to be a formidable opponent to successful retirement. In a recent study, Fidelity Invesments estimated that an average 65 year old couple can expect to spend about $230,000 on medical costs during retirement. With discussions already underway to potentially trim social programs such as Medicaid and Medicare, that near quarter-million dollar price tag for you good health in your later years might well be expected to increase. And, if we move back toward a cycle of higher inflation rates; that price tag will escalate even more.
Figuring out that it'll take in dollars to live our your retirment years in comfort is no easy task. Individuals just arent equipped to come up with their own estimate. There are a host of reasons why this is the case, not the least of which are that [a] most people aren't very objective when it comes to their own resources and spending numbers, [b] there are too many widely accepted though wildly inaccurate "rules of thumb" and lastly [c] we tend not to provide for the very types of uncertainty that retirement time often hands to us.
Have you factored into your planning the cost of medical coverage during your retirement years? No doubt many of you will opt for coverage through some socialized program such as Medicaid and Medicare, but what about supplemental coverage that works in tandem with those programs? With current supplemental plans costing about $2,500 per year or nearly $5,000 for a retired couple, how will future premium increases in those premiums factor into your retirement income plan? And what about the inevitable costs that won't be covered by either of those programs?
Comprehensive wealth management planning provides clients with projections year-by-year leading up to and through retirement. When projections are completed with the help of a skilled advisor and a willing client, a frame-work for a future based more on knowing than the unknown can go a long way toward long-term financial success and less fear and anxiety over surprises and transitions. For the uninformed a resulting investment program created without analysis of all your financial issues may well be the biggest post retirement hurdle to overcome.
Increasing your investment returns will almost certainly help. But how do you do that without increasing the amount of risk that you take? Frankly, having your investment program managed by someone who puts their clients best interest first can add as much as 3% per year to your return just through the use of the right investments where fees, taxes and unnecessary costs are minimized.
Almost every financial consideration in the period leading up to and through retirement is based on hunches about what the future will hold. While no one has a crystal ball and can accurately predict the futures twists and turns, having an actual plan for retirement will almost certainly reduce surprises and at the least, provide a ready-made framework for evaluating the changes that will have to be made to adapt.
With 4 out of 10 men and 5 out of 10 women are projected to live to age 90, and with 1 in 7 men and 1 in four women expected to live to age 95, planning for the rest of your life and getting it "right" is based in large part on how long the "rest of your life" might actually be. Running out of money too soon would never be a good idea and yet we speak with people all the time that woefully underestimate their projected mortality ages.
One more word of caution; the age references here are based on current medical technology. As that technology improves, we can expect to live even longer lives and perhaps more importantly, we can expect to be more vital and active well into our later years.
Retirement doesn't need to be a financially scary time, frought with apprehension and anxiety. Planning for tomorrow is an important factor in helping to make your retirement the best that it can be.