If you have unsuccessfully tried to ignore the flood of warnings about how much healthcare, long term care and increased longevity will cost in retirement, you have company. While you shouldn’t ignore any information that can help you prepare, you need to examine the aspects of retirement that are most likely to affect your savings. Here are some common warnings, and ways you might want to respond to fit your situation.
Longer lives require greater savings, but even with an average life expectancy increasing to around age 79, this number is an average and not your number. If you are relatively healthy and have good genes, you may live beyond the average. Healthier older people might also want to work longer, which helps to close any savings gap.
Working beyond the normal retirement age of between 66 and 67 and contributing to a workplace 401(k) plan can increase your retirement funds in two ways: First, you add to, rather than deplete, your retirement balance while you work. And if you delay taking Social Security past normal retirement age, this benefit will grow significantly.
Yes, healthcare can be expensive. No, it won’t devour all retirees’ savings. Healthier lives can lead to fewer medical conditions. The federal government offsets some medical costs for most, and subsidizes other medical care. Plus, there’s always hope that a solution to expensive healthcare is on the horizon. In the interim, plan and save for future costs based on your unique medical history.
When you understand your financial risks, you can plan accordingly. If you haven’t saved enough and you don’t want to continue working, you might downsize your home. Or consider a reverse mortgage if you want to age in place. If you live in a high-tax area, consider moving. Most importantly, talk to your financial and tax professionals to learn how different risks may affect your financial resources in retirement.