Every day, millions of Americans dream and plan for the future – whether that means thinking ahead to their next week of work, getting ready for next month’s big vacation, or planning for their eventual retirement.
Indeed, recent reports indicate that retirement is a top priority for millions of Americans, of all ages, backgrounds, and walks of life. In fact, a 2018 survey found that 52 percent of Americans, from ages 22 to 74, say that they think about retirement “four or more times a week.”
But thinking of your dream retirement is one thing. Taking concrete steps to bring it within reach? That’s another matter entirely.
To wit? Recent reports indicate that only 17% of American workers are “very confident in their ability to live comfortably in retirement.” Even “top-earners” aren’t immune from some common retirement pitfalls. As Siavash Radpour, a research associate at the Schwartz Center for Economic Policy Analysis, explained to CNBC:
“Even the top earners don’t have as much [saved] as you’d expect them to have.”
As we get older, that once-far-off goal of retirement comes more clearly into focus. Whatever stage of your journey you’re currently on, it’s important to think ahead, and take concrete steps to ensure that you’re able to achieve the retirement you’ve always envisioned for yourself.
With that in mind, here are five key questions and considerations to plan for, as you look ahead to retirement:
1.) What Kind of Lifestyle Do You Want to Have?
As writer Ivory Johnson eloquently put it for CNBC: “A happy retirement is more than just money.” He continues:
“The key to achieving an active, satisfying and happy retirement involves more than having adequate savings. It also entails interesting leisure activities, creative pursuits and mental and physical well-being.”
In other words? Retirement is a time to live the life you’ve always dreamed about. It’s important to think ahead now to what you’d like to accomplish in retirement in the future.
Is your dream to move into the house you’ve always wanted? To travel the world? To start a “second act” career in a field that’s always been meaningful to you?
All of these hopes are attainable, but they require strategic thinking and active planning. Performing a lifestyle review is one of the most important steps you can take on the road to retirement – both taking stock of your current situation, and setting realistic expectations about where you’d like to be down the line. What’s your “vision” for retirement? What are your “wants,” “needs,” and “wishes,” and how can you leverage your assets to truly reach your goals?
2.) Have You Planned for Healthcare Costs?
Healthcare costs have been called “the often-overlooked expense” of retirement.
Studies have shown that our healthcare needs typically tend to escalate as we age. As of 2019, it is projected that a married couple retiring this year can anticipate spending more than $280,000 on healthcare costs alone in retirement.
For adults over 65, Medicare is an important part of the healthcare puzzle – but it’s also key to remember that Medicare doesn’t cover everything, including long-term care expenses (which nearly 70% of older adults will require at some point, and 14% will need for more than five years, according to recent reports).
As you prepare for retirement, it may be worthwhile to consult with an expert and look into all of the choices available to you, so that you can better understand and anticipate the ins and outs of key considerations like Medicare (and Medicare supplements), long-term care, and financial tools such as health savings accounts (HSAs).
3.) Do You Have a Plan for Retirement Income?
Planning for income in retirement is one of the key considerations that most people take as they prepare for this stage of their lives – but it’s also important to remember that the retirement “rules to live by” you may have heard in the past aren’t always going to be in line with the reality of our present.
Income in retirement can take many forms, including retirement savings accounts (such as a 401(k) or an individual account), investments, pensions, part-time employment, or business and trust income. Well in advance of retirement, it may prove critical to work with a financial advisor so that you can successfully address the coordination of your fixed and variable sources of income, including annuities, IRAs, 401(k)s, 403(b)s, and so on.
At the same time, it’s important to take a step back and look out for potential risk factors. For instance? Americans today are living longer than ever before, and it is projected that more than a third (40.6%) of all households are at risk of “running out of money” in retirement, according to a report from CNBC. It’s essential to think about the effects of longevity, and to plan for changes to the markets and the economy down the road, including preparing to compensate for the myriad ways in which inflation could impact your future spending, on categories ranging from food, to healthcare, to housing, to travel.
4.) Do You Have a Strategy for Social Security and Pension Election?
The decision on when to commence your benefits can prove incredibly important when it comes to successfully planning for retirement.
As an example? While Americans can begin accessing Social Security payments at age 62, there can be significant upsides to waiting, as an individual’s benefit actually increases “by 6 percent to 8 percent yearly until you reach age 70,” as economics writer Sarah O’Brien put it recently. At the same time, continuing to work well into “retirement age” could ultimately lead to a cap on your benefits, as O’Brien notes, since “there’s a limit to how much you can earn from working without your benefits being affected.”
This is just one example that’s illustrative of a larger point. The bottom line? Pensions and benefits are key pieces to the retirement planning puzzle. It may prove vital to have a grasp on how these tools work, so that you can leverage them strategically to maximize your lifestyle in retirement.
5.) Are You Prepared to Expect the Unexpected?
At FourStar Wealth Advisors, we tend to use the term “Live” to refer to the period in a person’s life in which they may not be generating substantial new savings and investments – or, perhaps, some but not much. It’s all part of our unique “Build. Live. Share.” approach to financial planning and wealth management, which is focused on preparing for every stage of an investor’s journey, in order to help each person enjoy a more full and complete life.
With this in mind, it’s important to remember that there are as many ways to live as there are people – and that no two individual experiences in this phase are going to be identical. There are many unique changes and events that can impact a person’s lifestyle in retirement. In many ways, one of the most effective approaches to this moment in life may well be to always “expect the unexpected.”
For instance? According to data cited by U.S. News & World Report, Americans largely expect to retire at age 66 – even though, in practice, the “average retirement age has been 61 since 2011.” Another survey cited by U.S. News suggests that “just 10 percent of workers say they are planning to retire before age 60,” but, in reality, “26 percent of retirees left the workforce that early.” In other words? There is often a gap between when Americans expect to retire – and when they actually make that transition.
In a similar vein? Many people tend to believe that they can push off the important financial decisions that go along with estate planning. However, an unexpected accident or illness could strike at any time, leaving you – and your loved ones – in the lurch. Preparing for estate taxes, establishing asset protection mechanisms (such as trusts), updating your will, updating the beneficiary information on your accounts, establishing your legacy through philanthropic giving – these are all important steps that could make a difficult transition easier for your loved ones, while ensuring that your wealth is used in accordance with your wishes.
About FourStar Wealth Advisors
Managing resources to help individuals live better in retirement is a core mission of Four Star Wealth Advisors. We are proud to offer retirement planning services as part of our approach to comprehensive wealth management and financial planning.
FourStar Wealth Advisors is an independent Registered Investment Advisor firm headquartered in Chicago, founded on providing the most impactful and tailored wealth management solutions to all clients. To do this, FourStar Wealth Advisors utilizes the latest technology and a broad range of investment solutions to ensure that each client has the proper tools and resources to put them in the best position possible to achieve their personal financial dreams.
Have any questions? Want to get in touch? Don’t hesitate to give us a call at 312-667-1750, or use our online portal to contact us today.
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