Retirees’ Financial Pressure & How To Plan For It

Anyone in the retirement planning stage should be aware of common financial pressures retirees face. Plan & be confident in your retirement. Read here....
adam@thrive-funnels.com
April 6, 2021

Retirement is a time for pursuing your passions, reaping the fruits of your life’s work, and making the most out of life. But there are many financial pressures facing those planning to retire in the coming months and years.

There Are Fewer Retirement Benefits Than Ever Before

Retirement benefits looked different in decades past than they do today. Before the 1980s, employers helped fund their employees’ retirements through pension plans. Today, few companies outside of the public sector offer pensions, and most that do are closing their plans to new employees. Some have even seen their promised pensions reduced or frozen.

Retirement benefits aren’t what they used to be, but there are actions you can take to get the most out of your existing benefits.

Maximize Your Social Security Benefit

For social security, having a strategy is essential for maximizing the benefit. Some ways to get the best benefit include:

• Taking inventory of your health history, expected longevity, and lifestyle

• Selecting the optimal retirement age for your situation

• Accounting for other income streams and savings (such as pensions, a 401(k), annuities, etc.)

• Understanding the tax implications of your other income streams (and how to reduce them where you can)

Keep an Eye on Your Pension

If you were promised a pension, congratulations! But some people may experience a freeze, where employers will no longer provide pension credit for future years of work.

If this is your situation, talk to your company’s human resources department to help calculate what your new payments will look like. Ask if they offer anything to help compensate for the money you weren’t putting away in retirement (for example, a buyout option).

Health Care Costs Are Rising

Most people have a greater need for health care as they age—and it can get expensive quickly. In fact, it’s one of the largest expenses you’ll need to consider during retirement.

In general, health care is only getting more expensive. As baby boomers age, the number of Americans ages 65 and over is growing dramatically and this rise in demand will drive up health care costs. The Centers for Medicare and Medicaid Services projects that health care costs will rise to an average of 5.4 percent every year until 2028. (1.)

In addition, people who reach age 65 are likely to live longer than ever before — in fact, about six years longer than their grandparents on average — prolonging the time that they require medical care. (2.)

Health care needs arise whether we like it or not, but you can prepare yourself.

Open an HSA Account

If you’re on a high deductible health insurance plan, consider opening a Health Savings Account (HSA). HSAs offer unrivaled tax efficiencies. They allow you to contribute pre-tax dollars that can be used towards current or future medical expenses. The money in the account carries over every year—even after you retire. After a certain threshold, the pre-tax dollars in the account can be invested in securities, and essentially serve as another IRA.

Look into Tax Deductions

You may be able to itemize your tax deduction and deduct unreimbursed medical expenses on your tax return. This strategy usually works best for people who require a lot of expensive health care services.

You May Need to Financially Support Others

Many people don’t just need to support themselves during retirement, but others, too. Whether you’re helping an adult child who needs support, aging parents who aren’t self-sufficient, a family member in need, or a combination of these, caring for those that rely on you can impact your retirement. Have conversations with your loved ones now—even if it’s uncomfortable. Gathering documentation and developing a plan while your loved ones are still healthy will better prepare you to care for them later.

With the Right Plan, You Can Be Confident in Your Retirement

At first glance, these pressures on your retirement may seem overwhelming. But no obstacle is insurmountable— especially if you have the right plan on your side. With a comprehensive retirement plan, you can enter this exciting phase of your life armed with the resources you need to thrive.

If you have questions about your retirement plan or need help solidifying your plan, talk to a financial professional. At Plan For Your Goals, I help both the newly retired and the nearly retired take control of their finances with an evidence-based plan so they can retire with confidence. Don’t waste any more time wondering what to do about your retirement. Use the “Schedule a call” button at the top of this page so we can chat.

Sources

(1.) “National Health Expenditure Fact Sheet.” Centers for Medicare and Medicaid Services, 2020. December 16. https://www.cms.gov/ Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet.

(2.) Zuo, Wenyun, Sha Jiang, Zhen Guo, Marcus W. Feldman, and Shripad Tuljapurkar. “Advancing Front of Old-Age Human Survival.” PNAS 115 (44), 2018. doi: https://doi.org/10.1073/pnas.1812337115.

What Accounts Should You Consider If You Want To Save More?

What Accounts Should You Consider If You Want To Save More?

Investors often ease into their savings strategy with small investments into their 401(k) plans. Later, as their finances allow, they “graduate” into other investment vehicles for their retirement nest eggs, such as IRAs and taxable accounts. As their financial lives become more complex, many investors will ask, “If I have a fixed sum of money to invest every month or every year, what accounts should I consider if I want to save more?”

Will Your Social Security Benefit Be Reduced?

Will Your Social Security Benefit Be Reduced?

Choosing the optimal time to start receiving your Social Security benefit is an important step toward ensuring that your retirement income and savings will last throughout the rest of your life. No one wants to leave benefit dollars on the table due to a poor timing decision, not even those who have adequate savings and pensions and are not relying upon Social Security to fund their retirement. The problem folks are facing, though, is that choosing an optimal time to claim their benefit is neither simple nor straightforward.

A Guide to Setting Goals for Your Retirement

A Guide to Setting Goals for Your Retirement

Are you wondering how to set yourself up for retirement? Thinking you've reached the retirement age? It's important to take the time to make sure you can enjoy the next phase of your life. Ensuring you do the right financial planning for retirement is essential, and...

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Many have no financial plan for retirement. At Plan For Your Goals, my mission is to help both the newly retired and the nearly retired take control of their finances with an evidence-based plan so they can retire with confidence.

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