A recent study conducted by the Insured Retirement Institute * revealed that as Baby Boomers are now entering or nearing retirement, they are grossly under-prepared. In fact, findings show that 45% of Boomers have zero retirement savings. Of the 55% that have saved some, many have massively underestimated the amount that they will need to make it through their retirement years. Getting professional financial assistance can help prepare you for retirement.
According to the study, Boomers’ lack of preparation stems from misjudging how much annual income they will need, underestimating health-care and long-term care costs, and failing to work with a professional.
As you plan for your golden years, check out these tips on how to avoid the costly physician retirement mistakes many retirees in Ada County are currently facing and then continue reading below as we discuss each point.
Have Realistic Income Expectations
According to the IRI, the average spending of Americans ages 65-74 is $55,000 per year. However, this number may be significantly higher depending on your retirement lifestyle goals. Nevertheless, many Baby Boomers assume that they will need less than the average to live on; in fact, 60% of Boomers plan on living on under $55,000 a year.
Because of this unrealistic expectation, many Boomers have greatly underestimated how much they should save for retirement. When questioned about what they would do if money runs out, 58% claimed that they plan to live on Social Security income alone and 37% stated that they would attempt to re-enter the workforce. Both of these options greatly limit your retirement lifestyle, especially if you want to spend your golden years traveling, giving to charity, or other enjoying other luxuries.
In order to have a realistic expectation of what kind of income you will need during retirement, evaluate your lifestyle goals. Additionally, plan for a long life, accounting for both inflation and rising life expectancy.
Understand Healthcare Costs
The IRI’s survey also showed that only 8% of boomers have purchased long-term care insurance. Half of those who have not purchased it claimed they were going to rely on Medicare instead. This assumption which shows a major lack of education, as Medicare does not offer substantial long-term care coverage.
The moral of the story? Get educated about what kind of insurance you will need during retirement. As life-expectancy continues to rise, it is essential to prepare to outlive your money. Additionally, you must account for the increased healthcare costs that may be inevitable in your later years.
Work with a Professional
Above all else, Baby Boomers reported that they wish they would have saved more for retirement and started saving earlier. So, how can younger generations avoid making the same mistakes?
The IRI found that Boomers who worked with a financial advisor were three times more likely than those who did not work with an advisor to believe they would be “more secure in retirement than the average American.” Indeed, working with an expert improves confidence in your personal wealth management and retirement plans. If you are a young professional entering the workforce, an advisor you trust can help you create and manage a retirement plan that will ensure you start early and stay on track to reach your goals. If you are further into your career, an expert can help you create a plan to catch up and even get ahead in your savings.
At IMAFS, we are fee-only financial planners who specialize in creating individualized retirement plans. We will assist you in setting realistic goals to ensure you can live the lifestyle that you desire during retirement. Contact our professionals for comprehensive physician retirement planning in Canyon County and get started today!
*https://www.myirionline.org/docs/default-source/default-document-library/iri_babyboomers_whitepaper_2019_final.pdf?sfvrsn=0
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