Ah, retirement! No more commuting, dry cleaning or deadlines. The 9-5 grind is over and you’re free to write your own life script. Sounds like fun, except that for many retirees, there is a nagging worry: running out of money.
That’s the top financial concern of retirees according to the American Institute of CPAs (AICPA). It’s driven largely by rising health care costs, with an increasing emphasis on the impact of long-term care expenses later in life, and how these and other expenses may make it difficult to maintain current lifestyles and spending levels.2
If you recently retired here are a few suggestions for stretching your retirement dollars that can help you worry less about outliving your savings.
- Consider long-term care insurance
Long-term care costs go up every year and show no signs of slowing down. According to the 2018 Genworth Cost of Care Survey, the national median annual cost for assisted living facilities and for home health care was approximately $48,000, while a semi-private room at a nursing home was $89,297.5 Without long-term care insurance, these kinds of expenses could quickly deplete your retirement savings if you haven’t planned ahead. Remember, Medicare doesn’t cover all medical expenses or long-term care expenses.
- Plan for rising health care costs
While basic hospitalization insurance (Medicare Part A) is available at no additional cost to those age 65 and over who had Medicare taxes taken out of their paycheck (or, in some cases, their spouse’s paycheck) during their working years, there are plenty of out-of-pocket expenses retirees need to cover. These include premiums for Medicare Part B medical insurance and Part D prescription drug coverage, supplemental Medigap insurance, plus various deductibles, co-pays and co-insurance. Some overlooked health care costs that are typically paid out-of-pocket include vision exams and eyeglasses, hearing exams and hearing aids, and dental services. Some Medicare Advantage Plans (Part C) may cover all or a portion of these services.
You may need or want to buy supplemental coverage.
Health care can cost you a lot, which is why you should make it part of your retirement financial plan. According to the Employee Benefit Research Institute (EBRI), a 65-year-old man needs $144,000 in savings and a 65-year-old woman needs $163,000 in savings for a 90% chance of covering health care expenses during their retirement years.3
Remember a 65-year-old has a better than even chance of living another 20 years. Your investment return target should include budgeting for inflation, taxes and how much you will be withdrawing from your accounts every year. A financial advisor can help guide you here.
- Take prudent savings withdrawals
You’re no longer adding money to your savings accounts so money you take out will slowly decrease your balance. You’ll want a plan that gives you the money you want but doesn’t drain your account too quickly.
The Program’s “BeReady!” Service can help. Call 844.253.8692 to talk with a Financial Advisor.1
- Helping family members
Some new retirees may find themselves part of the sandwich generation, with aging parents on one side and adult children on the other. If you must help out, set limits on how much you can spend without putting your own retirement security in jeopardy. Look at it this way: if you fail to properly manage your own finances, you could become a burden to your children in later years.
- Seek out senior discounts
Many retailers offer discount pricing for seniors, but you may have to ask. When you take trips or enjoy entertainment like movies, museums and other attractions, consider visiting during off-peak hours when prices may be lower. These are the types of small savings that can add up over time. Consider joining associations, like AARP, to access discounts.
Program resources can help
The Program offers tools and services that makes planning easy. For more information on the tools and services available read The Tools You Need For Retirement and Financial Planning.
If you plan carefully, spend wisely, take care of your health and pay attention to your changing “needs” and “wants,” you can enjoy your retirement freedom with a greater sense of financial security.
1 Financial Advisors are Investment Advisor Representatives of, and offer securities and investment advisory services through Voya Financial Advisors (VFA), Inc. (Member SIPC).
2 Source: AICPA Personal Financial Planning Trends Survey, August 20-September 24, 2018 retrieved on June 24, 2019 from https://www.aicpa.org/content/dam/aicpa/interestareas/personalfinancialplanning/community/downloadabledocuments/pfp-trends-survey-topline.pdf
3 Source: EBRI May 16, 2019; Accessed June 23, 2019 from https://www.ebri.org/content/savings-medicare-beneficiaries-need-for-health-expenses-in-2019
4 Source: CDC: https://www.cdc.gov/nchs/data/series/sr_03/sr03_038.pdf
5 Source: 2018 Genworth Cost of Care Survey, retrieved from https://www.genworth.com/aging-and-you/finances/cost-of-care.html on June 24, 2019