When does "retirement" start for most Americans?
The median US retirement age is 62, and only 19% of men and 11% of women are in the labor force by age 65. Many retire due to health or disability, family reasons, company changes like downsizing and closings and some because they can afford to retire. It’s important to start saving early to prepare for the ‘what ifs’ that can and do happen in life. (Employee Benefit Research institute 2006 Retirement confidence Survey and the U.S. Bureau of Labor Statistics)
Will Inflation make an impact on my retirement?
Inflation has averaged 4.6% (including food and energy) over the last 38 years. Loss of purchasing power can be frighteningly detrimental: If you had $1,000 of income generated from investments at age 65, with a 5% inflation rate your purchasing power at age 85 would only be $377! It is important to diversify your investments into different buckets and to consider products that can help fight inflation (Employment Benefit Research Institute 2006 Retirement Confidence Survey and the U.S. Bureau of Labor Statistics)
Where does retirement income come from?
For those that were 65 and older in 1998, 37.6% came from Social Security, 20.7% from earnings, 19.9% generated from assets, 18.7% employer benefits and 3% other. Everyone’s situation is different, and if you do not have a pension plan through work, it weighs more heavily on the individual to plan and save for retirement. A general rule of thumb would be to save at least 10% of what you make, and if you start later that number can go up to 15-20% or more of what you earn. (U.S. Department of Justice)
What special circumstances do women need to keep in mind?
Women average 12 years out of the work force to care for children and aging parents. Because of this, women end up paying less into social security and work retirement plans, and the time away can effect compensation and promotions to coveted higher-paying positions. Women also live an average of 5.3 years longer than men, so they save less and live longer. If you’re married, make sure that you and your spouse work together on a cohesive plan for retirement. (Employee Benefit Research Institute and Social Security Administration.)
What concerns should I keep in mind for Health Care in Retirement?
For most, Medicare and Medigap insurance doesn’t kick in until age 65. If you retire early there is a gap of coverage that needs to be filled through savings or personal health insurance policies. Long term care for many men is taken care of in the home by wives and daughters, but since women tend to outlive men, they end up needing care in a nursing home. In fact, 50% of women reaching age 65 will spend some time in a nursing home. Only around 2-3% of Americans own Long Term Care Insurance yet almost 50% will have a need for care at some point in their lives. (American Association for Long-Term Care Insurance, 2011 LTCI Sourcebook)
Why should I use a professional?
Prior to retirement many people have most of their retirement assets in a company-sponsored retirement plan. At retirement, when you arrive at the critical distribution phase an advisor can be helpful in reviewing all of your income streams, making sure that your insurance programs are comprehensive enough to meet future needs and that tax and estate planning are taken into consideration. While this post-retirement checkup is good, starting earlier with an advisor can help you see opportunities to save money, learn about options you may not be familiar with and make the most of what you have to work with.