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Tax Forms and a Pencil

Knowing What's Around the Bend Can Make For a Smoother Ride in Retirement 

The Challenge of Living Longer

Since 1950, life expectancies have increased by more than 10 years, (1) which means you could be preparing for a retirement that lasts 30 years or more. So how long are you going to live? Of course, there's no way to know for sure. But today there's a higher probability that you'll live longer than your parents or grandparents, so you need to plan accordingly to reduce the risk if outliving your retirement savings.

Also consider:

  • The first person who will live to 150 is most likely alive today (2)
  • The number of 100-year-olds is expected to increase between two and seven times by the year 2020 (3)
  • Women tend to outlive men by five to seven years (4)

So, the good news is we're living longer. The challenge is we're not exactly sure how we're going to fund a longer retirement.

Where will the money come from? The answer: You

Thirty years ago, pensions played a major role in retirement planning for many Americans. Today, the number of traditional employer pension plans has decreased from a peak of 112,000 in 1985 to approximately 22,000 in 2015. (5)

With the future of Social Security uncertain and traditional pensions becoming a luxury of the past, more of the burden of funding retirement is falling on individuals. Defined contribution plans, such as 401(k)s and 403(b)s, have become the default vehicles for helping to fund retirement. The downside is, they often leave investors exposed to market volatility without any protection. Working with me as Your Personal Money Coach, my job is to find a solution to this challenge.

The Challenge of Rising Cost

Keeping up with increasing expenses

Inflation

Prices for basic expenses (food, housing, transportation, utilities, etc) tend to increase over time. But most of us underestimate the impact these costs can have on our standard of living in retirement. Inflation rates have varied historically, but even at relatively modest rates, inflation can diminish your purchasing power in retirement.

Healthcare Costs

In additions to basic expenses, the cost of healthcare is one of the biggest financial challenges facing Americans today. It is now projected that over 43% of Americans age 39 - 65 will lack adequate income to pay for basic expenses and uninsured healthcare costs during retirement. (6)  And healthcare costs can be an even bigger concern in retirement, when health issues are more likely to arise. For women the costs could be even higher, as they represent 70% of the residents in long-term care facilities. (7)

Taxes

While taxes today still remain relatively low across all income brackets, a new reality has already set in for most Americans: taxes are going up. and, with a U.S. national debt of over $18.3 trillion, (8) there's a chance that taxes will continue to increase, taking an even bigger bite out of your retirement income. I can't think of a bigger reason why you need to work with Your Personal Money Coach to explore tax saving strategies. 

The Challenge of Market Uncertainty

Market volatility and low interest rates

When markets experience volatility for an extended period of time investors tend to shift money out of the stock market into fixed income investments. The trouble is, when interest rates are low for an extended period it becomes far more challenging to produce the income needed in retirement. This difficult reality forces many retirees to adjust their expectations and lifestyles in retirement. Working with Your Personal Money Coach can provide strategies to combat market uncertainty. 

1 CDC/National Center for Health Statistics (www.cdc.gov/nchs/), accessed October 2013

2 Forbes.com, The First Person to Live to 150 Has Already Been Born - Revisited!, February 3, 2013

3 U.S Census Bureau, April 26, 2011

4 National Center for Women in Retirement, 2011; the Social Security Administration

5 Businessinsurance.com, Number of defined benefit pension plans hit all-time low, February 2013

6 Employee Benefit Research Institute (EBRI), May 2012 

7 American Association for Long-Term Care Insurance (AALTC), Long-Term-Care - Important Information for Women

8 www.usdebtclock.org, accessed September 2015

Contact  me to secure your future with our financial planning and tax preparation services.