How is your retirement savings strategy working for you? You might be on track toward your goals, or maybe you know you need to save more. No matter how healthy your retirement account may be, it can be easy to grow complacent about your plan.
If you saw your parents retire comfortably, seemingly without too much effort, you may be under the impression that you will be able to follow in their footsteps. But today's retirees face very different circumstances from those faced by the previous generation. As you're planning for retirement, keep the following four trends in mind.
1. You will live longer than your parents. If you were born in the 1950s, it was common to see people live to about 68 years old. That was the average life expectancy in those days. But today, the life expectancy of the average retiree is 79 years and growing. The good news is that you'll enjoy a longer retirement. The bad news is that you also have to fund that longer retirement!
2. Most people don't have a pension. Your parents' generation of workers often enjoyed retirement pensions, in which their employers offered them a guaranteed income for the rest of their lives. But pensions are becoming less popular nowadays, and even companies that still offer them are beginning to phase out the option. Pensions are being replaced by 401(k) funds, which means the responsibility of saving for retirement falls more heavily on employees.
3. The cost of health care is rising. The cost of health care has increased at two to three times the inflation rate over the past two decades. The inflation rate is near zero right now, and yet the cost of health care is still increasing by 2 to 4 percent each year! Medicare will not cover all of your medical bills and prescriptions, and supplemental insurance will only relieve some of your burden. The bottom line is that you will pay more for health care than the previous generation of retirees.
4. Social Security regulations have changed. Your parents probably didn't have to pay taxes on their Social Security benefits, but there is a good chance that you will. Full retirement age has also been redefined, so you will wait a year or two longer to start receiving your benefits. In the event that you need to stop working before you reach full retirement age, you will need a consistent form of income in the meantime.
Since the overall picture of retirement has changed rapidly in recent years, you will have to plan more carefully for retirement than your parents did. Remember to schedule regular meetings with your financial advisor to discuss your savings strategy.
14625 - 2015/6/30
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