Preparation in retirement means planning for costs beyond what you may expect, especially given concerns regarding depletion of Social Security funds. While most individuals believe their expenses in retirement will be about 70-80% of current expenses, planning for a ratio closer to 100% is typically more realistic. In the past three years alone, cost of living in the United States has risen by 14%. Greater expenses, combined with increasing life expectancies, and an increased likelihood of high-cost medical expenses with age, are just a few of the reasons why everyone should be rethinking what it takes to age comfortably throughout retirement.
Rising life expectancies and cost of living can make saving for retirement challenging. In fact, nearly half of adults age 40-49 have already dipped into retirement plans and about one-quarter of American workers do not have a retirement savings plan. With early withdrawals or lack of any savings plan, the Government Accountability Office (GAO) found median retirement savings for Americans was just $107,000, translating to, on average, $310 monthly. Experts recommend savings between $500,000 to $1 million for retirement, far more than most individuals expect or plan for.
So, what can you do? We at the Aging at Home Association want to help set you up for a happy retirement, and planning can make a world of difference. Below, find a step-by-step guide to set yourself up for a successful retirement:
- Decide how you want to spend your retirement and write down specific objectives. Whether you plan to spend retirement relaxing close to home, volunteering in your community, or travelling the world, understanding what your life will look like is necessary for a successful retirement plan.
- Understand your current finances. Make sure to include not only income and savings, but also items of value you may decide to sell, such as antiques or collectibles, as well as any hobbies or skills you may want to focus more energy on in retirement and potentially turn into a source of income.
- Take stock of your health. Schedule your checkup with your primary care provider and talk to them about your current health status and ways to keep yourself as healthy as possible later in life. Maybe take up a new form of exercise or practice brain games to keep yourself mentally acute.
- Create a budget. Map out the income you’ll be receiving during retirement, the cost of reaching your step one goals, and any monthly debt payments you are responsible for. This is also a good time to start saving. Maybe try to cook more at home and avoid takeout, or cut down on the streaming services you’re paying for; your retirement budget will thank you!
- Prepare for the unexpected as you build your budget. You want to make sure that necessary home repairs, an emergency health event, or other unforeseen costs won’t derail your plan. Ask yourself and discuss with your loved ones what the plan will be if you face an unexpected bill, and make sure that you aren’t going to be caught off guard. Also understand that Americans age 65 and older have a 70% chance of needing Long-Term Care, which can come at incredibly high costs. If you can afford it, purchasing a long-term care or hybrid life insurance plan can help cover these costs. As a member of the Aging at Home Association, you also have access to Home Care Secure, which can help cover short-term care needs in the home in the form of cash payments, up to $1,200 weekly.
- Hold off on collecting Social Security. The longer you wait to collect these payments, the richer your benefits will be.
No matter how far away retirement is for you, start planning and take advantage of these free resources to help you budget and save for the life you want, today.