Recent studies have revealed some new trends in retirement. People are waiting to retire longer than ever before and that the number one fear for those in retirement is not being able to afford healthcare.
Longevity risk is a big factor in retirement planning today. The longer we live, the longer our retirement dollars need to last, says Joshua Kadish, an RPG Life Transition Specialist. He says it's "absolutely critical" for people to complete an expense sheet to make sure they know what their monthly expenses will be in retirement and they should probably estimate about $1,000 per month towards healthcare. That amount may be towards a Medicare supplement or Medicare advantage premiums or out of pocket expenses for prescription drugs. This may be way, explains Kadish, that we're seeing more and more people work to the age of 65 when they become eligible for Medicare.
Long-term care is a big issue for retirees because it's not covered by standard Medicare. With the average nursing home costs up towards $60,000 per year, that can bankrupt retirees. "We need to make sure we're planning for all contingencies and worst-case scenarios, says Kadish.
What's most important, says Kadish, is that people understand the importance of proper planning. Once people understand what their expenses are, you should be able to estimate how many total dollars may be spent over the course of retirement. A conservative projection of how much money you'll have in investments and income from social security needs to be factored to see if there's enough money to justify retiring and support a desired lifestyle. If you can afford to retiree, the plan needs to be revisited regularly and if you can't afford to retiree, it's good to know so you can delay retirement and lower expenses going forward, Kadish explains. The last thing you want is to "run out of funds before you run out of breath."
Kadish thinks that when planning for retirement, it's important to consider both income and lifestyle. It's important to know what your "number" is, or a personal family index number, which is the amount of money you need to live the lifestyle you want throughout retirement, which is directly correlated to how much income you're able to generate from your portfolio. He says they're not mutually exclusive and so it's important to look at both.
Joshua Kadish is a Life Transition Specialist at RPG Life and spoke with Retirement News Today. Retirement News Today is a featured network of Sequence Media Group and provides online retirement news video content.