Essential Facts about Retirement Saving
Although most individuals will reach retirement age, not nearly enough of them will get to enjoy much of this time of their lives due to financial constraints. Consequently, it’s essential for everyone to implement a practical savings plan so that they will not have to stress about how they are going to meet their financial needs during this time of their lives. The facts below will provide you with a clearer understanding of how to plan for – and achieve – this.
Traditional Pension Plans are Disappearing
In years gone by, employers routinely provided corporate pension and retirement plans. However, data compiled by USA Today that was provided by the Employee Benefit Research Institute has revealed that fewer companies and employers are now providing these than ever before. In fact, only just over 10% of private sector employees are currently contributing to dedicated company pension plans – a sharp decrease from almost 40% during the late 70s.
Economists have noted that very few employees have any access to a company-sponsored 401(k) or other similar pension or retirement account. It has also been revealed that only 30% of lower-income households have access to funds like these in comparison to more than 80% of higher income households.
Age Is a Crucial Consideration
Most women who are able to retire at age 65 will need enough retirement funds to last for approximately 21 years, whereas men will generally require sufficient funds to see them through for around 18 years after stopping work.
Owing to the fact that full retirement age will be increased to 67 for anyone who was born in 1960 or later, most of the millennial generation may not have to stretch their retirement savings as much. However, this doesn’t mean that they should delay starting to save towards this time of their lives.
Retirees will also need to account for additional healthcare expenses, regardless of when they start withdrawing funds or how healthy they may currently be. Research has revealed that the average retired couple should count on spending almost $300,000 on age-related healthcare – and this does not even take the cost of any type of nursing home or long-term care facility into consideration.
Maintaining More than One Source of Income
More retirees than ever before are no longer relying entirely on an income from Social Security. In fact, more than a third of them either remains formally employed or own businesses that they are still actively managing. A further 20% of them are drawing down from their savings or dedicated pension plans, while a further 10% are in possession of assets from income.
Many financial experts advise their clients to replace up to 45% of their pretax income with funds from their savings plans. If done in conjunction with obtaining a Social Security benefit, it should be enough for anyone who earns between the $50,000 and $300,000 threshold to live on each year. For retirees to maintain the lifestyle they had while employed, it’s usually only necessary to replace between 55% and 85% of the income they received while they were still employed.
If you haven’t yet done so, now is the best time to start planning financially for your golden years. Contact us today to find out how to ensure that you will be able to retire without having to worry about finances. Our team looks forward to working with you.