Nov 18, 2019 2:58 PM

Ask the Expert: Can you afford to retire?

Posted Nov 18, 2019 2:58 PM

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By The Meckenstock Group

Studies show Americans are anxious about running out of money in retirement, but few have made an effort to determine what they will need in retirement. In this brief article, I will share the facts and figures facing all of us “in or close to retiring” and what you can do to change the course and retire with dignity.

We work forty years with expectations that we will be able to retire at the same income level as we had during our working years. However, the reality shows us that many “forgot” to save along the way. A recent survey from the Protected Lifetime Income Index (PLII) study shows that only 28% of non-retired Americans have made an effort to determine what their monthly income needs will be. Of those between the ages of 55 and 74, only 43% have made the calculation. So less than half of pre-retirees know “what their number is.” This is important because if you don’t “know what you’ll need”, then how do you “know what to save” to hit your goal. It is a common adage that people spend more time planning their vacations each year then they do in planning their finances!

The same study shows that 66% of Americans look forward to retirement with hope and optimism. Seeing it as an opportunity to enjoy the next season of life, with more travel, vacation homes, spending time at the lake, golf course, or purchasing that motor home to see the country. After all the years working and “living the American dream” the harshness of not being prepared for 25-30 years in retirement hits hard. Like a Joe Frazier left hook. In addition to not saving enough, medical expenses have dramatically risen, creating an even greater burden on those with limited (and reduced) income in retirement. A July 2019 study by the National Association of Plan Advisors found that a healthy 65-year old couple retiring in 2019 could expect to spend $369,000 in todays dollars over their lifetime for future health care. And if one of them lives beyond age 85, the estimated costs could be 250% higher than age 65. In addition to rising health care costs, basic living expenses for utilities, home maintenance, repairs are on the rise as well. Will these rising costs ever end?

Probably not. So what does one do about it? One of the first things to do is to do an inventory of all your investments, savings accounts, pensions, 401K’s etc and see what you’ve accumulated up to this point. Then do the same thing on your expenses and debts, see what they are and how fast you can pay down your debt and cut unnecessary expenses (do I really need all those cable channels and Sirius radio in all my cars?). According to the same PLII survey mentioned above 43% believe they have enough resources to live comfortably in retirement. This means about 60% of the people will not have enough money saved to retire in comfort. The second thing you can do is make a commitment to start saving from 10-20% of your gross income and take advantage of employer sponsored plans such as 401k’s, Simple IRA’s, 403b and voluntary savings programs. If you have access to saving money first from your pay checks, then you have a greater chance of not “spending” more than you make.

If you don’t have it in your checkbook, you won’t spend it. If you’re still spending more then you make, tear up your credit cards! But that’s a discussion for a later article. The third thing you should do is visit with a financial planner who understands the dynamics of long term planning and has a wide range of services at his/her disposal to help you meet your goals thru the development of an “income based” retirement plan that will “guarantee” you a monthly income in retirement.

It’s not hard to do any of these, it just takes discipline and a commitment from you to change some old habits and create new ones. Athletes and artists have coaches or mentors to help improve performance. When it comes to something as serious as your retirement, so should you. There is much more I could write on the topic and will. In this short article, I’ve outlined one of the many financial challenge’s individuals are facing today. These are the types of challenges we at The Meckenstock Group have been helping our clients with for the last 82 years.

(Mr. Meckenstock is a registered representative offering securities and advisory services through IFG, a registered broker-dealer, Member FINRA/SIPC. The Meckenstock Group, MSA and IFG are separate and unrelated companies. The opinions expressed above are his and his alone).

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