The following is a guest post from Chad Slagle, President of Slagle Financial, LLC, a Registered Investment Advisor.
Most people nearing retirement have had to adapt to a changing world along the way. At one time, retirement rested on what financial professionals like to refer to as a three-legged stool – Social Security, savings and a pension.
That stool went wobbly, though, when most private-sector pensions began to disappear.
Years ago, the idea was that your employer and the government would take care of you. But those days are gone. Now the burden is on each individual to make sure they’re prepared for their own retirement. That’s why it’s important to have a game plan.
Don’t despair, though, there are a few steps anyone can take to survive today’s pension-less retirement, including:
- Map Out a Retirement Strategy. Often, even people who are stashing away money for retirement don’t have a firm handle on what they’re trying to accomplish. It brings to mind the old saying: “If you don’t know where you’re going, how will you know when you get there?” Having a strategy helps you know your ultimate goal and what you need to do to accomplish it. Once you develop a strategy, you also need to remember that conditions don’t always remain the same. Changes in your income and expenses, along with fluctuating market conditions, can all have an impact on your plan. About every three years you review and, if necessary, update your strategy.
- Live Within Your Means. It’s difficult to save a comfortable retirement nest egg when you’re spending more than you earn and racking up debt. Create a budget and stick to it.
- Don’t Ignore the Cost of Health Care in Retirement. Perhaps people just assume they will be healthy forever. Or maybe they just don’t think about this subject. Either way, Slagle says, too many of them don’t plan for or underestimate how much health care could end up costing them. It’s been estimated that a 65-year-old couple who retired in 2014 would need about $220,000 to cover health care in retirement. So you need to work it into the equation.
- Remember to Account for Inflation. Just when you think you’ve saved enough – you haven’t saved enough. At least you didn’t if you failed to take inflation into account. The cost of living is going to go up. That means the value of the dollars you saved is going to go down. “You need to factor that in when you plan for your financial future.
- Prepare for the Possibility of Long-Term Care. This is another cost that many people don’t plan for, but the necessity of long-term care is a reality at some point for 70 percent of people over 65. The average annual cost of a private nursing-home room is $77,000, so it’s unwise to overlook it.
You need to start thinking about all this now, whether retirement is decades away or a few years away. The sooner you begin saving and planning, the greater the odds are that you’ll have a happy and secure retirement.