• Bernhardt Wealth Management

Retirement: Six Facts That Might Surprise You

With all that has been said, written, and discussed about preparing for retirement, it might seem that there is very little remaining that still needs to be talked about. However, some recent studies suggest that many approaching retirement may still be relatively in the dark concerning some important emerging trends that could have a huge effect on their retirement needs and the investment and financial strategies required to meet them.

  1. Retirement could last a lot longer than you expect. Currently, the average American will retire at age 66 and live until about age 79. But that average is consistently moving higher; for those on the younger end of the spectrum, it is entirely possible that they could spend as many years in retirement as they did working! Indeed, many researchers are predicting that living past the age of 100 will become the norm in the developed world; a World Economic Forum white paper suggests that the average life expectancy for babies born in 2007 will be 103. Even now, a 65-year-old woman has a 50 percent chance of living to age 85, and a man of the same age has the same chance of reaching age 82. In other words, most of us can expect to live for about two decades in retirement, and that time span is only going to get longer.

  2. Social Security is likely to fall short. Many advisors suggest that retirees should aim to be able to replace 80% of their pre-retirement income upon reaching retirement, and a significant portion of that is expected to come from Social Security. However, the current average monthly benefit is only $1,360, or $16,320 per year. For those earning in excess of $50,000 per year, this obviously leaves a lot of ground that must be made up with IRAs, 401Ks, or other investments.

  3. Americans are falling behind in savings. A 2013 study by the Economic Policy Institute found that a typical couple in their mid-50s to early 60s had only about $17,000 set aside for retirement. That would not likely fund a full year of most Americans’ lifestyles, let alone a two-decade retirement!

  4. Because of the historic shift away from lifetime employment at a single company (and the resulting pensions many enjoyed), only about 21 percent of Americans can expect a lifetime income from employer plans. Also, most of us have not replaced the traditional employer pension plan with a 401(k), IRA, or other defined contribution plan. As a result, nearly half of Americans have no workplace-related retirement savings vehicle of any type.

  5. Many of us will remain in the workforce past traditional retirement age. Due to many of the factors shown above, 14 percent of 70-year-olds are still working full-time, according to a study by the National Institute on Aging. Another 14% work part-time.

  6. Medicare will not cover the costs of assisted living. According to government data, around 70 percent of those who reach age 65 will need long-term care at some point in their retirements. Unfortunately, most don’t realize that Medicare does not pay for most costs of such care. In fact, Medicare covers only 100 days at a skilled nursing facility, and that only applies if the care was preceded by a hospital stay of three days or more. Meanwhile, the median costs of an assisted living facility is $3,600 per month.

For all of the above reasons, it is more important than ever for those planning for retirement to take full advantage of contributions to IRAs, 401(k) plans, 403(b) plans, and other defined contribution plans. Not only that, but investors should give careful consideration to the effects of inflation on their retirement nest eggs. A qualified professional financial advisor can help you learn your options and put in place a strategy that will help you face retirement with greater confidence.

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