Getting over the fear of spending down in retirement

You save for retirement, so when the time comes you can savor it. Good preparation can go a long way.

Retirees are living longer

Today more people are living longer – and the likelihood of living even longer increases for those who make it to retirement age.

Here’s a look at how longevity plays a factor in retirement spending. So, when your golden years arrive, you can be prepared to confidently move forward with your life.

For example, a 65-year-old man has a 50 percent chance of living to age 89 and a 25 percent chance of living to age 94. Women, on average, are outliving men: A 65-year-old woman has a 50 percent chance of living to age 91 and a 25 percent chance of living to age 96. For those who are part of a couple and reach the age of 65, at least one is likely to live to the ripe old age of 94 (50 percent) or 98 (25 percent).1

With the possibility of living for 30 years (or longer) after you retire, there’s a lot to consider.

Leading up to their retirement, you might worry:

  • Will my savings be enough?
  • How long will it last?
  • How much should I plan to spend on health care?
  • Should I leave money for my kids or spend it while I’m here?

In fact, 54 percent of Americans worry they might not have enough money for retirement.2

Stay healthy in retirement

Let’s face it. The older you get, the more likely it is you’ll need to pay more for health care. With rising health care costs, it can be nerve-racking to think about.

And some have had to come face-to-face with it earlier than expected: health problems are the most common reason (nearly 20 percent) why people retire earlier than planned. This can greatly impact a person’s savings and lifestyle, especially since the majority (70 percent) of non-retirees plan to do some work in retirement.3

Stats like these are likely to raise your blood pressure. In fact, more than one-third of American adults are more concerned about paying for health care in retirement than they are paying off debt and being able to afford lifestyle expenses right now.4  Less than 20 percent of workers feel confident they will have enough money to care for their medical expenses during retirement.5

Supplement your Medicare coverage

And it’s not hard to see why. Today the average couple spends in the ballpark of $280,000 to cover health costs during their retirement years. That’s because Medicare doesn’t cover everything – including dental and vision care and out-of-pocket costs such as deductibles and coinsurance.4

To offset health care costs, consider putting money into a health savings account (HSA), which has several tax benefits. In 2019, an individual can contribute up to $3,500, and a married couple can put away double that amount. Over 55 years old? You can add an extra $1,000 to the pot each year.4

Long-term care options

A major health event could require long-term care services. In fact, today more than half (52 percent) of 65-year-old Americans will need these services at some point in their lives. And it’s expensive: The national average cost is $7,441 per month or $89,297 a year.6 Because regular health insurance is unlikely to cover these costs, long-term care coverage is worth considering.

Diversify your portfolio

Your hard work, savings, and investments built you and your family a nest egg. There are things you can do to help make sure your retirement savings last a lifetime.

Withdrawing from your retirement funds during a market downturn can risk your long-term income. Diversifying can help protect your savings against downturns. A financial professional can help guide you.

Annuities are tax-deferred and can be a big help during your retirement years – providing you with guaranteed income and peace of mind. Nearly 70 percent of retirees who own an annuity have more confidence their savings and investments will last longer.3

Get familiar with Social Security

Social Security is an important source of financial security in retirement for millions of Americans. With pension plans becoming a benefit offered by fewer and fewer employers, Social Security continues to offer:

Lifetime retirement income

Social Security provides guaranteed income annually for life. The amount of your monthly benefit – called your Primary Insurance Amount (PIA) – is determined by how much you earned during your working life.

Cost-of-living adjustments

Social Security benefits may be adjusted annually based on changes in the Consumer Price Index (CPI), a valuable feature to help you offset the eroding effects of inflation.

Spousal and survivor benefits

These benefit options are for spouses or widows who may not qualify for benefits on their own earnings record, or qualify for a smaller benefit.

Learn how your retirement income and pension can affect your benefits and whether you should count on your Social Security to subsidize your retirement.

Leave a living legacy

You’ve taken good care to plan a successful retirement. Now it’s time to be grateful for the fruits of your labor. You might even want to share them with your loved ones.

Many people value experiences over material things. And it’s especially enjoyable to partake in these experiences when you’re in good health.

So make memories for yourself – and your loved ones – by doing the things you love with them. Maybe it’s going out to dinner, taking in the latest exhibit at your local museum or going on vacation. You certainly don’t have to foot the bill, but if you have the budget and the desire to do so, go for it! Some retirees would rather show their generous side while they’re alive – and can enjoy it too.

Leading up to (and after) retiring, it’s important to carefully think about what you need to do to make it a success. But it’s also important that you take time to enjoy it. After all, you only retire once.

Have additional questions?

A financial advisor can help answer any additional questions about your personal situation and readiness to retire.

Find an advisor

1. Assumes a person is in good health. 2012 Individual Annuity Mortality Basic Table projected for mortality improvement from 2012-2017.

2. Gallup, America’s financial anxieties ease in 2017, May 19, 2017.

3. “Busting Three Common Myths about Retirement,” LIMRA, March 13, 2019

4. Loudenback, Tanza, “4 Healthcare Costs in Retirement No One Warns You About,” Business Insider, May 2, 2019.

5. Employee Benefit Research Institute, The 2017 retirement confidence survey: many workers lack retirement confidence and feel stressed about retirement preparations, March 21, 2017.

6. “LIMRA Research Finds Nearly Two-Thirds of Consumers Think Long-term Care Insurance is Important,” LIMRA, November 8, 2018.

An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals.

Neither diversification nor asset allocation guarantee against loss, they are methods used to manage risk.

This information should not be considered tax advice. You should consult your tax advisor regarding your own tax situation. Guarantees are subject to the financial strength and claims paying ability of the issuing insurance company.

Not a deposit – Not FDIC/NCUA insured – Not insured by any federal government agency – Not guaranteed by any bank or credit union – May go down in value.

Product availability and features may vary by state.

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