If you want to make the most of your old age, taking the time to prepare for retirement is a smart bet. But if these things apply to you, it might be time to revisit your plan.
1. You assume that you will only need 15 years of income or less
Americans are living longer today. If you retire in your mid to late 60s, chances are you’ll need your savings for 20 years or more. And so, if you expect to need fewer years of income, you could end up selling yourself short.
Of course, there is no way of knowing how long you will live. But you might want to err on the side of being positive and increase your savings rate to make sure you have enough nest egg to support you through retirement. Even contributing an additional $ 100 per month to an IRA or 401 (k) plan over time could go a long way.
2. You think you will do very well with Social Security
Many people assume that they will do very well living primarily – or solely – on Social Security. In reality, these benefits will only replace about 40% of your salary if you are an average employee. And if your income is above average, it will replace even less.
In addition, it is possible that social security benefits will be reduced in the not-so-distant future. The program’s trust funds may run out of money by 2034, when Social Security may not have enough income to meet scheduled payments.
This is yet another reason why it is worth tweaking your retirement plan, namely by increasing savings. Even if social security is not removed, you should still plan to have it provided some of your retirement income, not all of it.
3. You think your health costs will go down under Medicare
Many people assume that once they enroll in Medicare, their health care costs will become much more manageable. Often the opposite happens.
Seniors on Medicare are responsible for a number of costs, from premiums to deductibles to co-payments. In addition, there are some essential services that Medicare does not pay for, such as dental care and eye exams.
If you plan to spend less money on health care in retirement, there are some numbers you better repeat. Fidelity estimates that the average 65-year-old man who retires this year will spend $ 143,000 on medical care, while the average 65-year-old woman will spend $ 157,000.
You can prepare to better manage these costs by putting money aside in a health savings account, assuming you are eligible (eligibility depends on enrollment in a deductible health insurance plan. high). Otherwise, you can increase your savings in your IRA or 401 (k) to cover your future health needs.
Planning for retirement is a smart thing to do, but it’s also important that your planning is precise. If these signs apply to you, you may need to revisit your plan so that you don’t find yourself strapped for income during your old age years.