Financial Planning for a Longer Retirement - Johnson Wealth and Income Management

An increasingly aging society is reshaping our perspective on retirement and how we prepare for it. As individuals live longer and healthier lives, let’s explore what this might mean for your retirement strategy.

Access to quality health care is changing how people age in our modern world. Some scientists even say that aging can be reversed, and someone who will live to 150 years might already be alive. As we embrace longer life expectancy, we must update our financial plans to help us support this new chapter in our lives.

In this blog, we’ll delve into these crucial aspects of financial planning to help you pave the way for a comfortable and worry-free retirement. Here’s what you need to know.

Reconsidering When You Retire

If you find yourself in good health, you might want to reconsider when you’ll retire. About 66 million people, or about 1 in every 5 U.S. residents, collected Social Security benefits as of February 2023.

When the Social Security program started in the 1930s, the retirement age was set to 65, the average life expectancy. If you retire at 65 today, you might have to use your savings for the next 20 to 30 years, which can be challenging if you have a little money saved.

58% of people saving for retirement (including those already retired) say their biggest worry about retiring is that they might run out of money to live on. This concern is even more vital for people close to retiring (like Generation X and Baby Boomers).

Because of this, many people are choosing to keep working longer than they first anticipated, either full-time or part-time, so they can save more money before they start using their retirement funds. A recent Transamerica Center for Retirement Studies survey found that 55% of workers plan to keep working after they retire. About 20% want to work full-time, and more than a third plan to work part-time.

This can prove a beneficial strategy, especially if you’re still healthy and feeling mentally fit so you can keep adding to your savings. Delaying retirement helps make sure you have enough money and also gives you something to do that keeps you thinking and gives you a sense of purpose.

Having a Comprehensive Savings Fund

A savings plan acts as a roadmap for wealth, helping you save for the lifestyle you want during retirement. A comprehensive savings plan covers short-term and long-term goals. It considers how much money you make, how long you have to save, and how much you can set aside.

To start your savings plan, list all your income sources and determine what you want to save for. Once you know your goals, you can decide how much money to put aside each month. Lastly, you choose where to keep your savings. For example, keeping your money in a high-yield savings account can help your wealth grow faster.

A good savings plan helps you decide which goals are most important to you so you can work towards them first. It’s important to note that each person’s retirement dream will differ based on what you want to accomplish in your golden years. By incorporating a detailed savings plan into your retirement strategy, retirees can enjoy financial security, peace of mind, and the freedom to enjoy their later years confidently.

Addressing Inflation in Your Investments

Inflation erodes the purchasing power of money over time. To curb inflation’s effects, diversifying your investment portfolio is essential. Diversification helps mitigate risk and positions your investments to grow over the long-term, helping your wealth keep pace with rising costs. Here are some tips to address inflation in your investments:

Invest in Stocks: Historically, stocks have shown the potential to outpace inflation over the long term. Companies can adjust their prices and earnings to keep up with rising costs, making certain stocks a potential hedge against inflation.
Allocate to Bonds: While stocks offer growth potential, bonds can help provide stability. Bonds can act as a buffer during periods of market volatility. Look for inflation-protected bonds like Treasury Inflation-Protected Securities (TIPS).
Real Estate Investments: Real estate can be a tangible asset that tends to appreciate over time. Rental income from properties can also provide a steady cash flow, helping to counter the effects of inflation.
Focus on Dividend Stocks: Dividend-paying stocks can help provide a consistent income stream that may keep pace with or exceed inflation. Look for companies with a history of increasing dividends over time.

It’s crucial to remember that no investment strategy can eliminate the effects of inflation. Still, a well-balanced and diversified portfolio can help you mitigate its impact on your wealth over time. Ultimately, working alongside a financial advisor can help you determine what investments are suitable for you.

Planning for Long-Term Health Costs

As we age, healthcare expenses tend to rise. Based on the Fidelity Retiree Health Care Cost Estimate, if you’re an individual who is 65 years old in 2023, you should have around $157,500 saved (after taxes) to take care of your medical expenses during your retirement years. Living longer brings increased medical needs, making it crucial to include healthcare costs in your financial plan.

Long-term care insurance is a helpful tool that protects your money from getting eaten up by hefty medical bills. This insurance can pay for things like care in a nursing home, living in an assisted facility, and other costs that regular health insurance or Medicare doesn’t cover. With long-term care insurance, you can have a safety net when times get tough – it eases the burden of paying for extended medical care.

A robust insurance plan can also keep your family from facing financial problems in the long run. As you get older and need help determining what kind of insurance you need, talking to a Fiduciary advisor who is highly experienced in insurance planning can help. Insurance lets you shift the financial risk of things that happen in life to an insurance company.

Working with a Financial Advisor

Navigating the complexities of financial planning for living longer can be challenging. A financial advisor can be a valuable partner in helping you craft a comprehensive plan.

At Johnson Wealth and Income Management, we aim to help you make informed decisions while accounting for life’s many changes. In addition to our complimentary consultations, we offer valuable resources to help educate our clients.:

These platforms cover subjects related to current financial events, keeping you updated on necessary information to achieve your retirement objectives effectively.

Final Thoughts

The changing landscape of longevity demands a new approach to financial planning. With an experienced financial advisor’s help, you can help pave the way to a secure and fulfilling future.

At Johnson Wealth and Income Management, we can help you on your journey toward financial stability by helping you make informed decisions and proactively planning for what’s to come.

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