Retirement is a time for pursuing your passions, reaping the fruits of your life’s work, and making the most out of life. But there are three top stressors in retirement that can really mess up your plan! Intense financial pressures facing those who plan to retire in the coming months and years can cause a new kind of stress, which they may not have previously experienced. Here are the three challenges causing most of the stress:
- There are fewer retirement benefits than ever before.
- Healthcare costs are rising.
- You may need to support adult children or grandchildren financially.
With the right plan and advisor, these needs can be addressed, leaving you feeling less worried and more confident about how to face these challenges.
Why Retirement Benefits Look Different and What You Can Do About It
Retirement benefits looked quite different in decades past. Before the 1980s, employers helped fund their employees’ retirements through pension plans. Today, few companies outside of the public sector offer pensions, and most that do are closing their plans to new employees. Some have even seen their promised pensions reduced or frozen.
Retirement benefits aren’t what they used to be, but there are actions you can take to get the most out of your existing benefits…
1. Maximize Your Social Security Benefit
For social security, having a strategy is essential for maximizing the benefit. Some ways to get the best benefit include:
- Taking inventory of your health history, expected longevity, and lifestyle
- Selecting the optimal retirement age for your situation
- Accounting for other income streams and savings (such as pensions, a 401(k), annuities, etc.)
- Understanding the tax implications of your other income streams (and how to reduce them where you can)
2. Keep an Eye on Your Pension
If you were promised a pension, congratulations! But some people may experience a freeze, where employers will no longer provide pension credit for future years of work.
If this is your situation, talk to your company’s human resources department to help calculate what your new payments will look like. Ask if they offer anything to help compensate for the money you weren’t putting away in retirement (for example, a buyout option).
Rising Healthcare Costs and What You Can Do About Them
Most people have a greater need for healthcare as they age—and it can get expensive quickly. In fact, it’s one of the largest expenses you’ll need to consider during retirement.
In general, health care is only getting more expensive. As baby boomers age, the number of Americans ages 65 and over is growing dramatically and this rise in demand will drive up healthcare costs. The Centers for Medicare and Medicaid Services projects that healthcare costs will rise to an average of 5.4 percent every year until 2028.
In addition, people who reach age 65 are likely to live longer than ever before — in fact, about six years longer than their grandparents on average — prolonging the time that they require medical care.
Healthcare needs arise whether we like it or not, but you can prepare yourself…
1. Open an HSA Account
If you’re on a high-deductible health insurance plan, consider opening a Health Savings Account (HSA).
HSAs offer unrivaled tax efficiencies. They allow you to contribute pre-tax dollars that can be used towards current or future medical expenses.
The money in the account carries over every year—even after you retire. After a certain threshold, the pre-tax dollars in the account can be invested in securities, and essentially serve as another IRA.
2. Look into Tax Deductions
You may be able to itemize your tax deduction and deduct unreimbursed medical expenses on your tax return. This strategy usually works best for people who require a lot of expensive healthcare services. An advisor, like those at CSH who have extensive tax knowledge, should be able to help you with this.
How Will Financially Supporting Loved Ones Impact YOUR Retirement?
There are many people who need to support not only themselves during retirement, but their families and friends as well. Whether you’re helping an adult child who needs support, aging parents who aren’t self-sufficient, a family member in need, or a combination of these, caring for those that rely on you can impact your retirement.
Have conversations with your loved ones now—even if it’s uncomfortable. Gathering documentation and developing a plan while your loved ones are still healthy will better prepare you to care for them later.
With the Right Plan, You Can Be Confident in Your Retirement
At first glance, these top stressors in retirement may seem overwhelming. But no obstacle is insurmountable— especially if you have the right advisor and plan on your side. With a comprehensive retirement plan, you can enter this exciting phase of your life armed with the resources you need to thrive.
If you have questions about your retirement plan or need help solidifying your retirement plan, we encourage you to call Steve or Robbie today! They are passionate about helping people plan and execute the retirement phase of life.
Just reply to this email or call 217-824-4211 for the Taylorville office and 573-808-1959 for the Columbia, MO office.