Plan for living longer in retirement
by: Temma Ehrenfeld
When making your retirement plan, remember that life expectancy is at an all-time high. Also figure that you'll need extra funds for medical expenses not covered by Medicare. For now, try to revise your priorities so you can save between 10% and 20% of your income, depending on your age.
You don't want to just retire. You want to have enough money to travel, pursue new interests, and do whatever you didn't have time to do when you were working full-time.
To retire comfortably, the big questions are: How much money will need and how will you get it?
How much is enough
It's important to prepare for a lengthy retirement because life expectancy has reached an all-time high for Americans. A 65 year old expect to live at least another 20 years, according to figures from the Centers for Disease Control. You want to be sure your money will last throughout your retirement.
You can probably live on about 80% of your yearly earnings before you retired (although some experts suggest you aim for 100%). With that in mind, multiply the amount you'll spend each year in retirement by 25 to arrive at a total. Of course, you'll need to factor in inflation, as well as retirement income from sources such as Social Security, any pension you might have, and perhaps part-time work.
A Financial Advisor or My Retirement Plan our online retirement savings calculator, can help you run the numbers and provide as estimate of how much of save for your retirement and a plan for how to do it.
As for health care, keep in mind that Medicare does not cover everything. In fact, the Employee Benefits Research Institute predicts that out-of-pocket health-care costs will also rise. (Medigap insurance may help with some costs that Medicare doesn't cover.)
How to build your savings
Spend less than you earn so you can save and invest. Try to save between 10% and 20% of your income each year. (For more detail, see Wells Fargo Advisors' How Much Should I Be Saving for Retirement?) Other suggestions:
- Consider taking full advantage of a 401(k) or any other kind of retirement account with tax advantages. If your company matches 401(k) contributions, try not to pass up a cent.
- If you've maxed out those options or you don't have a company plan, think about setting up monthly contributions to an Individual Retirement Account (IRA).
- Consider working with a Financial Advisor who can help you address your specific goals, objectives and tolerance for risk.
- Depending on your specific situation, you may want to discuss with your financial advisor and tax professional the implications of paying off your mortgage while you're still working full-time, as well as any other debt. More than 60% of households made up of people ages 55 to 64 still owe money on their homes, up from 49% in 1989, according to Federal Reserve Data.
- Make retirement savings a priority over your children's college costs. As personal finance journalist Jane Bryant Quinn quips, "Your kids can borrow their way through school, but you can't borrow your way through old age."
Source of Article: Wells Fargo: Beyond Today