It’s the number one fear of the baby boomers saving for retirement: outliving their savings. 60 is the new 90. Soon to be retirees are being forced to plan for a possible extra 20 years on top of their original plan. According to the CIA’s Factbook website, life expectancy rates have risen from 47 years in 1900 to 78 in 2013.The number of seniors ages 65 and older in the United States is expected to more than double from 39 million today to 89 million in 2050.
Medical advances and societal improvements have added to our current longevity. Better water sources, vaccinations, education, cancer treatments, labor laws all have improved our life expectancy through the years. What does this mean for retirement?
It means that those who are looking at their retirement plan, how long they plan on working versus how long they need to save for, need to keep in mind the extra years they will need to provide for. If you make $30,000 a year, you might need an ADDITIONAL $150,000 for just five more years of life. And with Social Security cut backs just about assured, retirees must be ready.
The most obvious solution to this problem is delaying retirement. That’s a bitter pill to swallow while you’re day dreaming of the golf course. The truth is, not everyone will have enough wealth to carry them on to retirement and sustain an extra 20 years with no problem. That means a longer workforce career. Those who can afford it can switch to part-time work.
Do you have the gumption to save enough? Can you live below your means in order to have enough when retirement is upon you? Are you willing to live in a smaller home? Drive a more economical car? Not take expensive vacations? These are the hard questions retirees should be asking themselves.
One major health scare can wipe out everything you have over-night. If you or your significant other has a stroke, the average cost of care up to 90 days after is $15,000. For 10 percent of patients, the cost of care for the first 90 days after a stroke is $35,000. That’s just 90 days. If you or your significant other has a minor heart attack without any major complications, depending on where you live, it could cost you upwards of $92,000. Even if you had health insurance that paid 80%, you would still need to come up with $18,400 not to mention the cost of on-going care. If you needed 24 hour home care, one of the lowest rates you can find is $16/hour. That’s $384 a day. For 90 days that’s $34,560.
Other things you can do to save for retirement are things you should be doing anyway. You should be maxing out your employer’s match on your 401k, regularly contribute to a traditional or Roth IRA. There are even some lifetime annuity options that could be good for your needs. Talk to your financial advisor to start your plan, no matter