Here's how to manage your risk
Retirement planning is a tenant of sound financial planning. Everyone wants a relaxing retirement where money isn't a concern. However, as the average lifespan increases, many people now are concerned their financial plan won't last, and that they will outlive their money. Between the average lifespan, Social Security, and healthcare, here are some things to consider for managing your money over your retirement years.
You'll likely live a long retirement
As the average lifespan continues to increase, it means people are spending more time in retirement than in previous decades. For instance, you might plan to retire at age 65, but just a few generations ago the lifespan wasn't even 65 years old! Now, if you live to your 90s, you could be spending 30 years or more in retirement. That's a significant chunk of time.
So, as you consider your future, you must account for increased life expectancy, which may result in a longer than expected retirement. As a result, you may need more money.
Think about retirement income
While you likely don't want to work through your retirement, you may want to consider keeping a small job to have money continue rolling in. This can not only help alleviate financial stress, it can also keep you engaged and busy in your later years.
However, not everyone wants to work through retirement. Still, you can find other ways to keep income coming in without working, with money from:
- Real Estate - as a property owner you can earn rental income from tenants.
- Dividends - stocks often pay regular dividends to shareholders.
- Bonds - interest payments can be steady.
Social Security can help
The age at which you take Social Security benefits will determine how much money you will receive. If you need the money, you can take benefits earlier than your retirement age. Depending on when you were born, your full retirement age is between 66 and 67. But you may not know that you don't need to take benefits at full retirement. In fact, the longer you wait, the more money you will receive, up to 108% of your full benefit amount. Therefore, waiting can be a good option for those who don't need the benefits right away, and may expect to live a longer life into retirement.
You can estimate the benefits you'll receive, but you never know what might happen. By the year 2034, the Social Security Trust Fund may run into financial issues, and possibly may not be able to pay out enough money to retirees. While we hope the federal government finds a solution, remember that benefits could change in the future.
Keep healthcare costs in mind
As you age your expenses will change. You may downsize your home and spend less on rent or a mortgage, but one of the areas where you will likely spend more is on healthcare costs. Aging generally comes with more health issues (hopefully minor), and added trips to the doctor and prescriptions will start to add up. In fact, it's estimated that the average couple retiring at age 65 pays $315,000 for health care expenses in retirement.
Be prepared for anything
Nothing is guaranteed, and you don't know what tomorrow will bring. That's true not only with your own finances, but with federal retirement programs like Medicare and Social Security. That's why having a plan and being prepared for the unexpected can lead to a less stressful, more enjoyable retirement. After all, if you're healthy and live until the age of 105, the last thing you'll want to worry about is your financial situation.