Retirement Costs and Savings for Boomers
Retirement should be time of relaxation and reflection, not panic. For many people, the realities of what it takes to retire have snuck up on them. Healthcare becoming a regular part of life is an increasing worry, and the cost associated with keeping oneself alive and well is not only essential, but a constant fear for some. Once retired, a person must budget with the funds that have been set aside for these years.
The recent economic changes in the U.S. have altered how Boomers view their retirement income sources. Just a few years ago, 4 in 10 Boomers felt sure that Social Security would be a major source of income, while 36% cited an employer-provided pension. Today, 59% of Boomers see Social Security as a major source, while only 26% expect a pension to provide significant income.
Relying on Social Security is probably not the best option. The average Social Security payment in 2016 is $16,100. So unless you plan to work well into your golden years, you’ll need to supplement this amount with personal savings.
One of the biggest costs in retirement is healthcare. According to the Insured Retirement Institute (IRI), Boomers tend to underestimate healthcare costs in retirement. It’s a worrying trend that Boomers planning for retirement, allocate just 23% of their income for healthcare, when those aged 60 or older currently spend 33% of their income on healthcare.
The EBRI’s Retirement Security Projection Model® based on the simulated life paths of Early Baby Boomers and Late Baby Boomers showed that roughly 44% were projected to lack adequate retirement income for basic retirement expenses, plus uninsured healthcare costs.
With these facts in mind, it seems that more preparation early on could be the best defense against finding yourself in a bad situation later in life. Life can throw you a curveball, even when you are prepared. As the great Ben Franklin once said, “By failing to prepare, you are preparing to fail.”
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