The Biggest Financial Pressures Facing Retirees (and how to plan for them)

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 many financial pressures facing those planning to retire in the coming months and years. Retirement benefits look different today compared to decades past. Before the 1980s, employers helped fund their employees’ retirement 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, however, we listed actions you can take to get the most out of your existing benefits today.

Maximize your Social Security Benefit
Select the optimal retirement age for your situation.
Account for other income streams and savings (ie: pensions, 401k, annuities, etc).
Understand the tax implications of your other income streams and how you can reduce them where you can.

Keep an eye on your pension
If you were promised a pension, congratulations! However, some people may experience a freeze where employers will no longer provide pension credit for future years of work. If this is your situation, speak with 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 (ie: a buyout option).

Health care costs are rising
As baby boomers age, the number of Americans ages 65 and over is growing dramatically and this rise in demand will drive up health care costs. The Centers for Medicare and Medicaid Services projects that health care costs will rise to an average of 5.4% every year until 2028. Health care needs arise whether we like it or not, but you can prepare yourself.2

Open an HSA account
If you’re on a high deductible health insurance plan, consider opening a Health Savings Account (HSAs). 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.

Look into tax deductions
You may be able to itemize your tax deduction and deduct unreimbursed medical expenses on your tax return.

You may need to financially support others
Whether you’re helping an adult child who needs support, aging parents who aren’t self-sufficient, or a family member in need, 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 pressures on your retirement may seem overwhelming. But no obstacle is insurmountable—if you have the right 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 plan, schedule a call with us today. 

Sources:

  1. “The Biggest Financial Pressures Facing Retirees (and how to plan for them). https://abm.emaplan.com/ABM/MediaServe/MediaLink?token=eec12f85ff324a61b01cfe4090b8b0f0
  2. “National Health Expenditure Fact Sheet.” Centers for Medicare and Medicaid Services, 2020. December 16. https://www.cms.gov/ Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
  3. Zuo, Wenyun, Sha Jiang, Zhen Guo, Marcus W. Feldman, and Shripad Tuljapurkar. “Advancing Front of Old-Age Human Survival.” PNAS 115 (44), 2018. doi: https://doi.org/10.1073/pnas.1812337115.

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