Scary Facts About Retirement

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Sure, ghosts and goblins are scary, but in some ways there’s nothing scarier than retirement.

It’s that spooky time of year again. But when it comes to true scares, Halloween can’t compete with retirement. The transition to retirement is one of the biggest changes you’ll ever make in life, and for many it is full of unknowns. But as with anything scary, the best way to conquer your retirement fears is to face them. I’ll tell you just how on today’s show, Scary Facts About Retirement. I’ll share some scary facts about saving, inflation, healthcare, longevity, Social Security and more. Most importantly, I’ll tell you how investing for income can help you eliminate many of these scary unknowns and enter retirement with enthusiasm and peace of mind instead of fear.

Let’s start with some scary statistics about the very foundation of retirement: your savings. The good news is that over half of Americans say they are actively saving retirement. The bad news is that it’s just over half: 58 percent according to one recent study. That means 42 percent of people aren’t saving at all. And of those who are saving, 48 percent say they have less than 10,000 dollars put away. Among Baby Boomers, more than half say they expect all or most of their retirement income will come from Social Security.

That’s a scary notion when you consider these scary facts: The average social security benefit this year was just $1,503 dollars per month. That amounts to just $18,036 dollars in annual income, which is only $5,200 dollars over the federal poverty level. Nor could you count on your benefits to keep pace with inflation. The program’s annual cost of living adjustment, or COLA, is typically low, and it’s usually negated by increases in premiums for Medicare part B. The COLA was just 1.3 percent this year – far below the estimated annual healthcare inflation rate of nearly 5 percent.

Speaking of healthcare inflation, consider these scary facts: Since 1948, the price of medical care has grown at average annual rate of 5.3 percent compared to 3.5 percent for general inflation. That’s close to 6 percent, which means healthcare and medical costs essentially double every 12 years. That includes everything from prescription drugs to long-term care. As for drugs: According to the Employee Benefit Research Institute, a 65-year-old man with median prescription drug expenses in retirement would need about $73,000 dollars saved just to have a 50 percent chance of covering Medicare premiums and other out-of-pocket expenses. A woman in the same boat would need around $95,000.

And what about long-term care? Well, with costs doubling every 12 years, consider this: If you’re 60s today and budgeting as much as $200,000 dollars a year for full-time in-home care, by the time you actually need it in your late-80s or early 90s, the expense could be four times as high: 800,000 dollars. Again, those are some scary figures that help explain why so many people approach retirement with fear. But there are other reasons.

About 80 percent of Americans don’t understand retirement planning, according to the 2020 Retirement Income Literacy Survey. This statistic is scary but understandable when you consider this one: most Americans – 61 percent – report that they are learning about retirement planning mostly by word of mouth. And both of those statistics might help explain this one: More Americans today are working past retirement age out of financial necessity. According to the AARP, more than 20 percent of adults over 65 are either working or looking for work, and most say it’s because they have to. This number has doubled since 1995.

Yes, there are many legitimate reasons to be scared by the prospect of retirement. But the good news is, there’s no reason to be a prisoner of your fear. You can confront it and start working today to enjoy a happy, successful retirement instead of a stressful, scary one. In my experience, the key for most people lies in shifting your financial focus from portfolio growth to retirement income, ideally in the five to ten years before retirement. To begin with, the income model helps you understand why the size of your nest-egg isn’t the be-all and end-all of a successful retirement. Many people put too much emphasis on their lumpsum and not enough on having the right strategy. And because the income approach is more strategic than investing for growth, it must include provisions to address and tackle all the scary retirement issues I’ve talked about: longevity, inflation and healthcare inflation; the need to maximize your social security, satisfy your RMDs, create an estate plan and generate enough reliable income so you never have to go back to work if you don’t want to. Ultimately, investing for income helps you see retirement as something to look forward to, not fear – which is just as it should be.

 

All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Arbor Financial Services of Florida, Inc. and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or help protect against loss in declining markets. All information and ideas should be discussed in detail with your individual advisor prior to implementation. The presence of this website, and the material contained within, shall in no way be construed or interpreted as a solicitation or recommendation for the purchase or sale of any security or investment strategy. In addition, the presence of this website should not be interpreted as a solicitation for Investment Advisory Services to any residents of states where otherwise legally permitted to conduct business. Fee-based financial planning and Investment Advisory Services are offered by Sound Income Strategies, LLC, an SEC Registered Investment Advisory firm. Arbor Financial Services of Florida, Inc and Sound Income Strategies LLC are not associated entities. Arbor Financial Services of Florida, Inc is a franchisee of the Retirement Income Store. The Retirement Income Store and Sound Income Strategies LLC are associated entities. © 2021 Sound Income Strategies

 

 

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Arbor Financial Services of Florida is a full-service financial firm dedicated to helping those in the Melbourne, FL area meet their long-term financial goals. Our team of financial advisors and wealth managers are experienced in helping clients preserve their savings, so they can use it as a source of steady income in retirement.

Copyright © 2022 Arbor Financial Services of Florida. All written content on this site is for informational purposes only. Opinions expressed herein are solely those of Sound Income Strategies and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. Investing involves risk. There is always the potential of losing money when you invest in securities. Asset allocation, diversification and rebalancing do not ensure a profit or help protect against loss in declining markets. All information and ideas should be discussed in detail with your individual advisor prior to implementation. The presence of this website, and the material contained within, shall in no way be construed or interpreted as a solicitation or recommendation for the purchase or sale of any security or investment strategy. In addition, the presence of this website should not be interpreted as a solicitation for Investment Advisory Services offered through Sound Income Strategies, LLC, an SEC Registered Investment Advisory Firm. Arbor Financial Services of Florida, Inc. and Sound Income Strategies, LLC are not associated entities. Arbor Financial Services of Florida, Inc. is a franchise of The Retirement Income Store®, LLC. The Retirement Income Store®, LLC and Sound Income Strategies, LLC are associated entities.

A franchise of The Retirement Income Store.

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