Simple Strategies Can Ease Financial Anxiety in Retirement
Oct 01, 2018 08:00AM
By Kristen Beckman
For most Americans, retirement means the chance to enjoy all the things they haven’t been able to do while working, including relaxation, travel, spending time with family, and leisure activities.
But for many Americans, retirement also brings with it stress about finances and the ability to pay for both day-to-day and unexpected expenses. The increasing amount of stress associated with financial readiness in retirement is partly a result of an increasing life expectancy while the average retirement age has remained steady at about 65 years old. This means retirees and pre-retirees have to plan for their financial support for a much longer period of time – an average of 20 years today compared with just 12 years in the 1960s – according to data compiled by the Center for Retirement Research at Boston College.
Meanwhile, the retirement landscape is changing. Pensions, once the primary tool many used to fund retirements, are all but obsolete, leaving today’s workers with the responsibility to save for their own retirement. And the Social Security safety net could also soon be weaker. The Social Security Administration estimates that benefit outlays will exhaust the Social Security trust fund in 2037, meaning benefits will have to be paid from ongoing tax revenues at an expected 76 percent of scheduled benefits.
In Broomfield, seniors listed a variety of financial concerns in the Denver Regional Council of Governments Area Agency on Aging’s 2018 Community Assessment Survey for Older Adults. Among the reported concerns were having enough money to pay for daily expenses, being able to afford quality housing, and acquiring the skills needed to work.
It’s not just day-to-day expenses that create financial stress among retirees. A recent study by Fidelity Investments estimated that the average couple retiring today at age 65 can expect to need $285,000 saved to pay for healthcare and medical costs in retirement. In Broomfield, an increasing number of seniors reported concerns about finding affordable health insurance, paying for needed medications and dealing with public programs such as Social Security, Medicare, and Medicaid.
Knowing how much to save can be difficult. The top advice financial experts give to pre-retirees is to save as much as possible as early as possible. Compounding interest is a powerful force that can multiply savings over time and propel younger savers to greater wealth that older savers may not be able to catch up with. Experts also recommend fully funding 401k plans and taking advantage of automatic escalators that increase contributions annually.
Experts also recommend thinking about retirement goals while you are still working so that you can determine how much you need to save now to fund the lifestyle you want when you retire. These goals can include travel and recreation goals, housing expectations, and whether you hope to make ‘dream’ purchases like a boat or a vacation home. Online calculators are widely available to help you evaluate your current savings and expected Social Security benefits to give you a roadmap to achieve your financial goals.
Understanding Social Security claiming strategies can increase your benefits. Depending on your age, you can delay Social Security benefits for several years, which increases your monthly benefit when you begin drawing benefits. Conversely, claiming Social Security benefits early reduces your monthly benefit.
Having a plan for unexpected costs that could come up in retirement, including home repairs and expensive dental work, can help you avoid devastating financial impacts. Avoid using credit cards to manage unexpected expenses and consider the pros and cons of insurance products – such as dental insurance or long-term care insurance – that may help ease the burden of certain medical costs.
Tap into local resources to learn about financial planning strategies or to get help when finances get difficult. The City of Broomfield offers classes year-round through the Senior Center to help pre-retirees and retires understand financial strategies for retirement. Classes are also available at the library that teach how to maximize Social Security benefits and learn about investment withdrawal strategies.
In addition, the Department of Health and Human Services offers a variety of programs to help seniors who may be struggling to make ends meet. These include the Old Age Pension program, which provides financial assistance and, in some cases, help with medical benefits for low-income adults over the age of 60. The Prescription Discount Program helps residents save money on prescriptions not covered by insurance using a discount card accepted at participating pharmacies.