Apparently the last week of October has been designated National Retirement Security Week. For many women, retirement and security are thought of in separate contexts… as nurturers, our instinct is often to direct our energy and resources in ways that make our loved ones feel secure, even if at our own expense.
Discussions about retirement planning tend to center around whether we will live near the kids, where we will travel, or how to find our new ‘purpose.’ Many of us were taught that it’s not polite to talk about money. Combine that with a history of unequal pay and the fact that most women adjust their career paths at some point around family life, it’s no surprise our IRAs and 401Ks fall short.
Although we can’t change our past, we can draw on the resilience that helped us through it to successfully define and achieve our own style of retirement. No two households are exactly alike, and the same can be said for people’s retirement planning. For this reason, when examining your own, start with a holistic approach based on your particular situation. To simplify, break retirement planning down into 3 general categories: Home, Health and Hobbies.
The Three H’s
Consider where you want to live over the next 5, 10, and 20+ years…
Will you stay in your current community, relocate to be closer to the grandkids or seasonally divide your time between two locations? Is there the possibility of an aging parent moving in with you? If you are thinking about moving to a new area, would there be a cost of living adjustment compared to where you are living now?
If your health changes at some point and you require extra care, would you consider moving in with your adult children or relocating to assisted living? If you’d prefer to stay in your current home and hire a caregiver, what steps might you have to take sooner rather than later so that your home can meet your future needs? If you’re deciding between locations, take a look at AARP’s livability index, which evaluates neighborhoods and communities based on the various categories that impact our lives most.
According to HealthView Services, a leading producer of healthcare cost projection software, the average healthy 65-year-old couple will spend $281,847 in today’s dollars on lifetime Medicare and supplemental insurance premiums. When dental, hearing, vision and all other out-of-pocket expenses are calculated, the total estimate for healthcare spending in retirement jumps to $363,946, or $537,334 future value. For a 55-year old couple retiring in 10 years, that future value is $768,232.
Healthcare inflation, geographic location, age, and gender all factor into continuously rising costs. Based on the greater average life expectancy for women (89 vs. 87 for men), a 30-year-old female retiring at 65 can expect to pay $548,098 (in today’s dollars) in total lifetime retirement health care expenses – $118,632 more than a male of the same age.
HealthView’s data also projects that a 66-year-old couple will spend an average of 48% of their Social Security to cover total health care costs, a 55-year-old couple retiring in 10 years will spend 57%, and a 45-year-old couple, 72%. Considering the rumors about the uncertain future of the program, how much extra should we anticipate setting aside to make up the difference?
For assistance with these complex and ever-changing issues, go to WISER. The Women’s Institute for a Secure Retirement is an organization that was formed to focus exclusively on the unique long-term financial challenges facing women.
How do you see yourself spending your time? Will you explore what’s been on your bucket list for years or turn a long-time hobby into a new business? Maybe you’d like to stay connected to your current work but as a consultant so you have more time to travel.
If your pre-retirement lifestyle has always included a couple of major vacations each year, will your post-retirement income and budget continue to support that? Whichever direction you are leaning toward, consider how your activities will affect your overall long term financial planning.
Adjust Your Financial Strategy As Your Situation Changes
Whatever your picture of retirement looks like now, it will most likely change at some point in the future, for any number of reasons, maybe more than once. Whenever that happens, discuss the possibility of adjusting your strategy with your financial professional, even if you think your current plan could still work. There may be some additional benefits or tax savings that apply to your new situation.
Work with someone you trust who is knowledgeable on all aspects of retirement and doesn’t just focus on certain areas of your portfolio. Make sure your plan is truly the best fit for your situation. Remember that saying we’ve all heard many times regarding self-care and “put your own oxygen mask on first.” The reality of retirement is…the best way to be prepared is to prioritize your unique needs and to stay informed.