How Well Will Your Retirement Income Hold Up?
You’re in your late 50’s, and retirement is no longer a distant speck on the horizon. Leaving your working days behind, or at least working less, is in your near future. Whether you plan on semi-retirement or full retirement, you’ll want to make sure that your income will last.
In order to know if your income will last, you have to look at the factors that will serve to use up that income and potentially draw down your available assets. Once you are aware of these factors, you can work towards putting together a plan for covering those factors. So what are they?
This isn’t an exhaustive list, but almost all current retirees and pre-retirees are facing a handful of challenges we see regularly.
While it’s the least pleasant to think of, perhaps the biggest financial concern for you and those like you is the rising cost of healthcare, and the uncertainty as to what it will cost in the future. Since healthcare costs can devastate even wealthy individuals, you want to make sure that part of your plan is set up to mitigate the risks of aging. These may include oversized healthcare costs, hospitalization, or additional costs of living comfortably in a facility that can accommodate your needs as you age. You have to make sure that your retirement income isn’t taken up fully by these needs, and that your sources of retirement income aren’t depleted prematurely.
Inflation. Chances are that you remember a time when inflation reached 15% in a year, and the effect it had on your spending ability. At the very least you have seen how the price of goods rise as time goes on, even when the increase is gradual. It’s no mystery that a gallon of milk doesn’t cost what it used to, and you will probably experience the same rise in costs of living as you age in retirement. The biggest difference when you are in retirement is that you probably won’t be in a job that provides raises each year. Your retirement income will have to find a way to rise with your costs.
Longevity. With advances in surgery, disease detection, and medicine, people are living longer and longer. Although baby boomers are expected to spend more on healthcare than previous generations, they are expected to do so over a greater number of years. Like it or not, your retirement will probably last a while, and hopefully you are well set to enjoy it. With the prospect of a long and full retirement, it is important to make sure that your retirement assets are enough to outlast you and your spouse while you are taking income. You’ll also want to make sure that even if account performance is disappointing, you still have the income you need for the rest of your lives.
Longer careers. Many pre-retirees are facing a decision of whether or not to work longer in order to build more assets or supplement their retirement income from savings. If you are considering working longer, you’ll want to make sure you are doing your best to reduce costs as well. Increasing income will always help, but many pre-retirees find they can simplify their lives while cutting costs and lowering stress. Wiping out debt and reducing fixed living costs are a great place to start.
As you approach retirement, it pays to be proactive when addressing your retirement costs and how you’ll cover them. Construct a plan to create the necessary passive income while protecting your assets, before you need the income, and you'll increase your chances of a successful retirement.
Would you like to speak with us about your retirement income plan? Give us a call today for a consultation at no charge, without obligation.