GUEST POST!!! I mean, hey everyone! We’ve got an awesome guest post today by Sally Keys. Sally has been a professional finance writer and content manager for the past six years. She made the move to freelancing from a senior corporate banking role and loves the work-life balance it offers her. I’m not sure what “work-life balance” is, but it sounds healthy and satisfying. She enjoys reading, hiking, spending time with her family and travelling as much as possible. She loves travel so much that she even traveled all the way here to talk to you guys about the uplifting topic of the financial concerns that come with retirement. Not sure what “retirement” is either, but it sounds relaxing.
Sally, you have the room. I’m leaving to do………whatever. Bye.
As working people in our 30s, we dreamed of the day when we would be able to retire, relax and spend our time doing all the things we love to do. However, today’s economic situation has presented us with a rather bleak reality that is nothing like the dream we once imagined. According to a recent article published by Business Insider, the US government has a $20.4 trillion retirement problem and nowhere near enough money to pay pensioners what they were promised. With little that can be done to change the financial climate, the only thing we can do is take stock and make the adjustments necessary to retire with as few financial worries as possible.
Respect the Retirement Fund
One of the greatest financial concerns for seniors is the depleting retirement fund. It’s easy to fall into the bad habit of dipping into the retirement savings to cover other costs, particularly when supporting grown-up children who have yet to achieve financial independence. Therefore, one of the most effective actions pre-retirees can take is to lay down some serious ground rules and make children understand that the parent piggy bank will no longer be open for business. If children don’t learn to manage their own finances in time, they could end up having to support their parents through retirement, defeating the object of having a retirement fund in the first place.
Unforeseen expenses – unplanned medical costs, car repairs, house renovations – can also be the cause of a depleting retirement fund. As the savings decrease, the fear of retiring increases and many U.S. citizens find themselves trying to avoid retirement. The more we respect the retirement fund, the less we will fear leaving both work and a regular income behind us.
Plan for Rising Health Insurance Costs and a Disappointing Social Security
The sad fact is that we were promised a better Social Security than the one we’re going to get, but there’s very little that can be done to change the current economic climate. It is believed that the Social Security fund will run out of its $2.8 trillion in spare cash by the year 2034. With that in mind, we need to do a little financial planning and make the necessary adjustments to cover what’s really important, like health insurance.
Perhaps we were planning to enjoy a two-week holiday every year or maybe we were excited about living in our family home for the rest of our lives. Whatever our plans once were, health insurance costs are rising and a health plan that takes care of us as we get older is perhaps one of the most important things to have covered. It might be time to change the two-week holiday to one, to sell the house and move into something smaller in order to reap the benefits of a lump sum leftover from the sale. We could even cut back on weekly luxuries from the supermarket.
Deal with Mortgages, Inflation and The Rising Cost of Living
Living costs rise, inflation is a fact of life and mortgage payments fluctuate from one month to the next. Together they are a pre-retiree’s worst nightmare and many people need the expert help of a financial advisor to plan accordingly. Reverse mortgages, sanctioned by the U.S. Department of Housing and Urban Development, allow homeowners to convert a portion of the equity in their homes into cash and to freeze payments. Consolidation loans provide further solutions as they offer reduced monthly payment options for credit cards and medical expenses. However, the real difficulty lies in keeping up with inflation and the cost of living.
In 2015, there was no COLA (Social Security’s annual cost-of-living adjustment) and in 2016 the increase only amounted to 0.3 percent. Current figures estimate that the adjustment for 2017 is also likely to remain at 0.3 percent, making it highly difficult for retirees to keep up with inflated living costs. One way of dealing with these unavoidable financial strains, and to avoid outliving the retirement fund, is to factor in an annual inflation rate of about 3 percent. The U.S. Inflation Calendar offers a precise analysis of the cumulative rate of inflation for any date between 1913 to 2017.
Prepare for End of Life Provisions
The final financial concern looming over most U.S. seniors is planning for end of life expenses. Not only is it important to cover funeral services, but it’s also a good idea to consider including retirement home or home care costs in your plan. We can never be sure what kind of care we’re going to need, nor for how long we’re going to need it. Also, the financial burden that can be placed on children or other family members means that end of life planning is essential.
Remember that the most difficult thing about dealing with finances upon retirement is planning for the unpredictable. We cannot trust that the economic climate within which we live today is going to be that of tomorrow, which is why it’s best to be a little more cautious than overconfident and why we must always be prepared to make adjustments along the way.
Readers–What do YOU think!? What financial concerns do you have for your retirement? What steps are you taking to ensure your comfortable retirement? Leave your thoughts in the comments below!