Addressing The 3 Most Pressing Retirement Concerns

James K. Ault • October 4, 2022

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Retirement planning can pose a number of challenges. But even if you have successfully reached retirement, there are new hurdles that you may face… three in particular that can have devastating consequences if they are not planned for.

With that in mind, addressing the 3 most pressing retirement concerns should be a key component of your overall financial planning.

What exactly are these major financial concerns that retirees may face?

According to some experts, they include:

  • High – and rising – health care costs
  • Inflation / reduced purchasing power
  • Running out of money before “running out of time”

High and Rising Health Care Costs

According to a recent  study , an average retired couple age 65 in 2022 may need to have approximately $315,000 saved (after tax, and in today’s dollars) in order to cover health care expenses in retirement… and this figure doesn’t include the cost of a potential long-term care need.

After turning age 65, there is a 70% chance of needing at least some type of long-term care services at some point during your remaining lifetime. Based on the  Genworth 2021 Cost of Care Survey , the monthly median cost of just one month in a private room in a skilled nursing home facility in 2021 was over $9,000. A semi-private room was as close to $8,000 per month, and even home health care services were in the rate of $5,000 monthly.

Even with a significant amount of money in your portfolio, it may not take long to deplete the assets you have if you and/or your spouse need long-term care… even for a short period of time.

One way to hedge this risk is to ensure that you have proper health insurance, as well as long-term care coverage. Also having an annuity in place that offers an ongoing income stream can help to provide you with additional financial cushion.

Inflation / Reduced Purchasing Power

Over time, prices of the goods and services that you need tend to go up. So, in order to maintain your current standard of living, you will need to keep your purchasing power on pace. Using an average annual inflation rate of just 3.2%, your income would have to double in 20 years in order for you to keep up your present lifestyle.

One way to accomplish this is to increase the percentage of funds you access from your portfolio. This, however, can risk depletion of your portfolio more quickly. Therefore, other less risky techniques could include the purchase of an annuity that offers an income stream with an inflation rider on it.

Depending on the annuity, the dollar amount of your income could go up by a certain percentage each year. This amount may be based on the prior year’s CPI or some other formula.

Running Out of Money Before “Running Out of Time”

With people living longer now, it is not uncommon to spend 20 or more years in retirement. While this is good news, it can also present some challenges to your retirement income plan as cash flow must last for a longer period of time.

One way to ensure that income will continue to flow in, year after year – regardless of what happens in the stock market or even in the economy overall – is to purchase an annuity and choose the lifetime income option. With this financial vehicle in place, money will continue for as long as you live, no matter how long that may be.

Do You Have a Plan in Place to Address These Potentially Devastating Financial Concerns?

While annuities can provide solutions for various financial challenges in retirement, it is important to keep in mind that not all annuities are exactly the same. Therefore, talking over your specific situation and goals with an annuity specialist is recommended.

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