The late, great Yogi Berra supposedly said it: “The future ain’t what it used to be.” And the same could be said of retirement. Due to several factors, such as advances in health care, today’s retirees are living longer, more active lives than their predecessors. In fact, you could spend two, or even three, decades in retirement – which means you need a “longevity strategy.”
Such a strategy needs to be part of your overall retirement income strategy, but here are five key areas you’ll need to address:
- Lifestyle – What do you plan to do during your retirement years? Travel the world? Stay close to home and pursue your hobbies? Volunteer? Open a small business or do some consulting? Your choice of lifestyle will probably affect every aspect of your longevity strategy.
- Income – Your biggest threat to an enjoyable retirement is the possibility of running out of money. This fear is apparently widespread; in a survey commissioned by Allianz, a life insurance company, more than 60% of respondents said they were more scared of outliving their assets than they were of dying. You need to create a retirement income strategy that incorporates, among other elements, a withdrawal rate that allows you to take money from your 401(k), IRA and other investment accounts in such a manner that you don’t run out. You’ll also need to answer other key questions, such as when to take Social Security – as you may know, the longer you wait, the bigger your monthly checks, until they “max out” at age 70.
- Housing – Once you retire, you may want to review your housing situation. If you’ve already paid off your mortgage, and you like your house, you may want to stay there. But if you’re thinking downsizing, or moving to a more favorable climate, or even purchasing a vacation home, you need to calculate the costs and include them in your plans.
- Health Care – As far as health care, consider these questions: What will the treatment of existing medical conditions cost over the long term? Do you know what costs Medicare will cover? Have you thought of how you might pay for a nursing home or other long-term care? This last item is especially important, because the annual average cost for a private room in a nursing home is more than $90,000, according to the 2015 Cost of Care Survey, produced by Genworth, a financial services company. A financial professional can suggest ways of meeting these long-term care costs.
- Caregiving– It’s possible, at least early in your retirement years, that you could still be a caregiver to aging parents. If so, you might need to factor in these costs to your financial strategy. Later on, you may need some caregiving yourself, such as that provided by a home health aide. So you’ll need to consider these potential expenses.
- Your retirement years can be filled with activities and accomplishments. And you can get even more enjoyment from this time of life if you stick to an appropriate longevity strategy.
Eric Tibbs is a financial advisor with Edward Jones, Fort Myers Beach and can be reached at 239-463-0164.