Avoid The Bumps On The Road To Retirement
With the baby boomer generation quickly making its way toward retirement
, there are some issues that pre-retirees should be concerned with addressing before saying good-bye to their employers.
Long retirement period
When Social Security was first established, most retirees didn't live long after terminating the employment. But over the years, our life expectancy has increased significantly.
People in their 60s can expect to live an average of 20 years or more in retirement. Once we reach our 70s, the chances of making it to 90 or even 100 are greatly increased. Therefore, we need to make sure that our retirement nest egg is sufficient to cover a long and comfortable retirement.
Funding retirement
While we know that we need a big nest egg, we should give some thought to the sources that will provide those funds. Traditionally, retirement was funded by pensions, Social Security, and savings. However, times have changed.
Pensions have become a thing of the past. More and more companies are eliminating pension plans and adopting retirement plans that depend more on employee contributions. Many pension plans have become insolvent, leaving retirees with only a fraction of the income they expected.
We cannot rely on Social Security, either. Although many Americans currently rely on Social Security for a large portion of their retirement income, future retirees should prepare a back-up plan. Unless changes are made to the current system, the Social Security Administration estimates that benefits for all retirees could be cut by 26 percent by the year 2040.
Savings needs to become a priority. Most Americans spend more than we make. If we continue to operate this way, retirement will look extremely bleak for many of us.
How much will it take?
It is hard to get a clear picture of exactly what it will take to ensure a comfortable retirement. However, it is better to prepare as much as possible. We also need to make sure to account for inflation in any calculations that we do.
For example, if you plan on having a $5,000 per month retirement income, keep in mind that, based on a 3% annual inflation rate, 10 years from now you will need $6,700 per month. In 20 years, it will take $9,000 per month to maintain that same standard of living.
Rising health care costs should also be included as part of retirement income. If your employer's retirement package does not include full medical coverage for life, expect to pick up where our underfunded Medicare plan leaves off. According to the Social Security Administration, Medicare is in a much worse financial position than Social Security.
Reevaluate now
The way we handle our finances requires a changed attitude. There is no better time than the present to make sure that you are on the right track to a comfortable retirement. The sooner you are able to correct your current course of action, the better it will be for you financially.
by: Ozeme J Bonnette
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