Employment provides access to income, which is then utilized to purchase necessities and novelty items to maintain a lifestyle. The standard of living one is accustomed to during a lifetime of employment, changes drastically post-retirement. Having to manage expenses with less purchasing power and relying solely on accumulated savings, the lifestyle must shift to focus on immediate needs.
Women are greatly affected by retirement, even more so than men are. Studies reveal that women have less than one-half the amount of retirement savings in comparison to men. This is worrying, considering the fact that, on average, women generally live longer than men. Having a longer life expectancy with less savings at their disposal, women live with a fear of exhausting their retirement savings during their lifetime.
However, this unique situation that women find themselves in, can be overcome. Women planning for an eventual retirement can still prepare beforehand to be able to effectively plan out their savings. Below we list down a few valuable tips women should consider when planning and saving for retirement.
Avoid Simplified Online Tools
The internet has a host of online tools and utilities that offer a rudimentary calculation in an effort to find out your budgetary needs. These retirement calculators have a few input fields where you can list current savings and expenses to generate an overly simplified projection of the exact balance needed to enjoy your retirement.
Retirement planning cannot be reduced to such simple calculations. They require working with expert financial advisors in order to make accurate assessments on the balance needed; keeping in mind factors such as inflation and healthcare costs that a simplified online tool would not account for.
Retirement Savings, in Line with Life Expectancy
As stated previously, there is a real threat of exhausting retirement savings during an individual’s life. To combat this issue, it is best to calculate and plan according to life expectancy. An oft-cited statistic was calculating life expectancy from the date an individual is born, it is, however, more prudent to calculate life expectancy in line with the age a person seeks to retire at.
By re-evaluating your life expectancy at the age you retire, you have a more informed view on personal health and can be better prepared. For this purpose, it is also wise to record family medical history to estimate how many years’ worth of savings one is looking at.
Retiree, Health-care Costs
Health issues during the course of a lifetime is a fact. Dwindling health and sickness brings with it, steep medical costs that have to be incurred. Medical costs steadily siphon away a person’s annual income exposing them to a monetary risk; having to balance their earnings on personal health and towards their family.
Health-care costs are a serious factor that needs to be considered for life post-retirement, when old age-related health problems occur and intensify. The average American spends around $122,000 in health-care costs between the age of 70 and their eventual death.
It is imperative that the retirement plan include healthcare costs along with a calculation of costs such as premiums and deductibles related to health insurance. Provided your employer offers a health savings account, look towards contributing to it. The health savings is a tax advantaged savings account that can be utilized to pay dental and vision related expenses that are not covered by health insurance.
Impact of Inflation on Retirement Planning
A gallon of milk in 1990 was worth approximately $2.78, whilst presently a gallon can be bought for $3.50, a crude example to show that inflation is an ever-present reality. A difference of a few cents is a minor inconvenience, but imagine a difference of thousands of dollars that applies directly to the annual income needs of an individual.
In the past, $50,000 would have sufficed to maintain an individual’s standard of living, 10 years from now due to the rising inflation rate, $65,000 would be needed to maintain that same standard. The inflation rate has to be considered whilst devising your retirement plan, to have a realistic projection on the savings needed throughout your retirement.
Whilst forecasting your eventual needs, it is wise to have a diversified investment portfolio that will provide a rate of return superior to the ever-increasing inflation rate. This will provide a means of income needed to maintain your lifestyle.
Managing investments through Financial Advisors
It is smart to utilize the services of financial advisors for the purpose of maintaining your principal balance and also look at methods of growing it throughout your retirement. It is, however, necessary to know that a few fraudulent financial advisors do like to market costly retirement savings products such as annuities; which pay a measly fixed amount each month for a hefty price tag that is payed upfront.
Financial products such as annuities are deliberately marketed by financial advisors that operate on a commission basis, they are able to profit from selling them to customers. Your retirement plan should include researching, finding, and working with financial advisors that are able to provide you with the service that is ultimately in your best interest.