You probably first established a retirement savings goal years ago, and hopefully you’ve followed through on that plan each pay period. If so, congratulations on making a smart decision to build a more secure future… But, that doesn’t mean that you shouldn’t bother to re-evaluate your plans occasionally. The following four trends (and several others) might impact your retirement budget when the time comes. So it might be a good idea to consider increasing your rate of savings.
Average life expectancy is increasing. Around the middle of last century, the average life expectancy was 68 years. It was common to enjoy just a few years of retirement. Now, the average retiree is living into their 80s. A longer retirement is great news, but you’ll need to plan for income that lasts.
Pensions are rare these days. Pensions were major component of your parents’ and grandparents’ retirement plans. But most companies are switching to 401(k) plans now, so you’re responsible for the bulk of your retirement savings.
The cost of healthcare is increasing every year. Don’t let the low overall inflation rate fool you; the price of healthcare is rising at two to three times that rate. Since healthcare is a major expenditure for most retirees, this issue is more important for you than it is for everyone else. Medicare won’t cover all of your bills, and you will still pay toward medications, some services, and of course your Medicare premiums. Your healthcare budget will probably grow a bit each year.
Social Security faces major changes in the future. The problems faced by the Social Security system are no secret, and sooner or later some minor or even major changes will happen. Your benefits aren’t going anywhere, but you definitely won’t be able to count on them to fund your entire retirement.
We don’t intend to trigger worries, only to remind you that you face different retirement challenges than your parents and grandparents did. Every few years, you should evaluate whether you could be saving a bit more from each pay period. Schedule a meeting with us, and we can examine your savings rate and potential retirement budget, and help you make any necessary changes to your savings strategy.