If you want to enjoy your senior years to the fullest, taking the time to plan for retirement is a smart bet. But if these things apply to you, it may be time to give your plan another look.
1. You’re assuming you’ll only need 15 years of income — or less
Americans are living longer these days. If you retire in your mid- to late-60s, there’s a good chance you’ll end up needing your savings to last 20 years or longer. And so if you’re planning on needing fewer years of income, you could end up selling yourself short.
Of course, there’s no way to know how long you’ll live. But you may want to err on the side of being positive and ramping up your savings rate to ensure that you have a strong enough nest egg to support you throughout retirement. Contributing even an extra $100 or so a month to an IRA or 401(k) plan over time could go a long way.
2. You think you’ll get by just fine on Social Security
Many people assume that they’ll manage just fine living mostly — or solely — on Social Security. In reality, those benefits will only replace about 40% of your wages if you’re an average earner. And if your earnings are above average, they’ll replace even less.
Plus, there’s a possibility that Social Security benefits will be cut in the not-so-distant future. The program’s trust funds could run out of money by 2034, at which point Social Security may not have enough income to keep up with scheduled payments.
That’s yet another reason it pays to tweak your retirement plan — namely, by ramping up on the savings front. Even if Social Security isn’t cut, you should still only plan on having it provide some of your retirement income, not all of it.
3. You figure your healthcare costs will drop under Medicare
Many people assume that once they enroll in Medicare, their healthcare costs will become far more manageable. Often, the opposite happens.
Seniors on Medicare are liable for a number of costs, from premiums to deductibles to copays. Plus, there are some essential services that Medicare doesn’t pay for, like dental care and eye exams.
If you’re planning to spend less money on healthcare during retirement, you’d better rerun some numbers. Fidelity estimates that the average 65-year-old man retiring this year will spend $143,000 on medical care, while the average 65-year-old woman will spend $157,000.
You can set yourself up to better manage these costs by socking money away in a health savings account, assuming you’re eligible for one (eligibility hinges on being enrolled in a high-deductible health insurance plan). Otherwise, you can boost your savings in your IRA or 401(k) to cover your future healthcare needs.
Planning for retirement is a smart thing to do, but it’s also important that your planning be spot-on. If these signs apply to you, you may need to revisit your plan so you don’t wind up short on income during your senior years.
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