The Importance of Planning Ahead for Retirement

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In a previous blog post, we discussed how a stock market correction could affect retirement money. Of course market downturns aren’t the only factor which can drain retirement funds. Events such as emergency medical situations or unexpected personal crises may also lead to financial duress.

Being prepared is a key fundamental for retirement security. But many people aren’t taking those steps. According to various survey data, by 2030 almost 20 percent of Americans will be over 62 years old – currently the average age at which people retire. Data from the U.S. Census Bureau’s Supplemental Poverty Measure shows around 15% of Americans over 65 years old live below the poverty threshold. Moreover, almost 50% live “near poverty.” Or in other words, they have incomes which are less than twice the poverty threshold.

What’s the Future Look Like?

According to the Employee Benefit Research Institute, almost 60 percent of workers aged 55 years and older have less than $100,000 in retirement savings. Almost one-quarter of these workers have less than $1,000 saved, too. These dynamics are reflected in people’s expectations of Social Security benefits as a major income source. 36% of non-retirees anticipate heavy reliance on Social Security as a major source of retirement income – almost a 10-point bump up from what it was 10 years ago.

The shift towards Social Security is also reflected in the decline of defined-benefit pension plans as a foremost retirement vehicle. Consider the following:

• Towers Watson estimates over the last 15 years, the percentage of largest American companies offering new hires defined-benefit pension plans declined from 60% to 24%
• Public-sector defined-benefit pension plans are being slashed at the federal and state levels to readjust spending levels
• More people are looking at alternative retirement vehicles, such as fixed index annuities, for financial security

What are Solutions?

For retirees, a big concern is reducing the possibility of outliving their retirement funds. It’s recommended that efforts focus on:

• Preserving existing wealth
• Knowing how much of your funds are “Safe Money” – or what you can’t afford to lose
• Keeping your money out of volatile markets with high risk
• Having projections for future costs
• Knowing what sources from which you’re drawing income
• Being aware of how much income each source is contributing
• Cutting down on living costs where it is possible
• Having a plan set for transfer of wealth upon one’s death (if applicable)

For people who haven’t reached retirement age, it’s recommended that efforts center on:

• Coming up with a “retirement number”
• Evaluating your expectations for retirement lifestyle
• Determining future living costs
• Coming up with other future costs (including for healthcare & long-term care)
• Developing a retirement plan
• Investigating various vehicles to bolster your retirement funds now
• If you have a plan, readjusting it if needed
• Devising strategies as to when you’ll file for Social Security benefits
• Developing a plan for transfer of wealth (if applicable)

Need Help?

Retirement income planning doesn’t have to be a stressful process. Gain more financial confidence and peace of mind by working with a financial professional. When you're ready for personal help, can assist you.

Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

Author: Super User

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