Here at AgingOptions we interact with all sorts of people as they begin to plan for retirement. Some have a very realistic view of the future, and they’re not afraid to deal with reality as they contemplate what the future holds. Others seem to live in a dream world, refusing to look the future squarely in the eye, and holding onto assumptions and misperceptions that could very likely put their future security at risk. In short, some seniors are “clear-eyed planners” while others are more like “starry-eyed dreamers.”
We reflected on this fact recently when we discovered this extremely perceptive article on the USA Today website. The article was written by Maurie Backman of the popular financial website Motley Fool, and we were immediately drawn to the eye-catching headline: “Four Assumptions That Could Destroy Your Retirement.” Naturally we wanted to know more, and as we read this article we found ourselves nodding in agreement. In our view the kind of assumptions outlined in this article are exactly the ones that can cause seniors to enter retirement dangerously unprepared.
One caveat before we examine these four assumptions further: they all deal with finances. At AgingOptions we always remind our clients, radio listeners and seminar guests that financial planning, as important as it is, is only one facet of a good retirement plan. There are at least four more essential elements to a sound retirement strategy, all interrelated, which we’ll talk about at the end of this blog post.
Here’s how writer Maurie Backman introduces the four dangerous assumptions. “Think you’ve got retirement in the bag?” he writes. “It’s an unfortunate fact that many seniors approach retirement ill-prepared and run into financial trouble because of it.” He then goes on to explain “four major assumptions a large number of workers just plain get wrong.” Ready? Here they are.
Dangerous Assumption Number One, Backman writes, is miscalculating your life expectancy. Are you saving for a shorter retirement than you’ll actually experience? You’re not alone. “Many people who retire in their mid-60s assume that they’ll only need enough savings to cover another 15-20 years of expenses,” writes Backman. But that may not be enough. “People are living longer these days, and while that’s a positive trend in theory, it does pose certain financial challenges.” Once the average American man reaches age 65, he can reasonably expect to live almost 20 more years, says the Social Security Administration, while for a woman the life expectancy averages closer to 22 years past age 65. And remember, those numbers are only averages: 25 percent of today’s 65 year olds will live past age 90. “When planning for retirement,” says USA Today, “don’t make the mistake of selling your life expectancy short.”
Dangerous Assumption Number Two: overestimating how long you’ll be able to keep working. You may think you’ll be able to work as long as you want to, but “working into your mid- to late 60s or 70s is by no means a given,” says the article. A recent Voya Financial study reported that fully 60 percent of Americans ended up retiring earlier than planned, often due to job loss, health issues, or a family member needing care. It’s a good idea to keep working as long as you can, for both financial and personal reasons, but you also need to be prepared in case your plans should change and your work life be cut short.
Here’s Dangerous Assumption Number Three: assuming you’ll spend less when you retire. We’ve written about this in several posts on our AgingOptions Blog (including this one). A recent study by the Employee Benefit Research Institute reported that nearly half of retirees said they actually spent more during their first few years of retirement than before they quit working. Sometimes (for about one-third of retirees) this higher spending level continues for the first six full years of retirement! When planning for your retirement lifestyle, it’s essential to be realistic, or else your budget will prove woefully inadequate and your retirement plan will suffer.
Finally, Dangerous Assumption Number Four: believing Social Security will cover all your retirement expenses. This links closely to number three above. Social Security is designed to replace only about 40 percent of the average retiree’s income, and since the average beneficiary is only receiving about $16,300 per year, this is another area where your expectations have to be tempered with reality. Let the AgingOptions team of professionals help you by reviewing your financial picture before retirement looms – there may be ways you had never considered to boost your income well beyond what Social Security will provide.
From our perspective here at AgingOptions, all of these “dangerous assumptions” share a common theme: they involve a failure to plan thoroughly and comprehensively for one’s retirement years. Many retirees will set up a financial plan and feel confident they’ve done all they need to do, only to find out too late that their basic “money management” plan is inadequate and will lead them down the road to retirement disaster and disappointment. Money alone is not the answer! Yes, it’s vital to protect your assets in retirement, but what about your housing choices – can you avoid unplanned institutional care? What about your loved ones – can you avoid becoming a burden to those closest to you? With a traditional financial plan the answer is completely uncertain. With an AgingOptions LifePlan, the answer is a confident “yes,” because financial, medical, housing, legal and family components are all working together.
We invite you to join us for one of our free LifePlanning Seminars where you’ll learn much more about our revolutionary approach to the art and science of planning for retirement. A few hours invested will reap exciting dividends, we assure you! For a complete listing of locations, dates and times, plus online registration, click here, or call us during the week. Remember, there’s no obligation whatsoever.
The most dangerous thing you can do as a retiree, in our estimation, is failing to plan. Let AgingOptions help you create a LifePlan that will allow you to achieve the secure and fruitful retirement you’ve always hoped for!
(originally reported at www.usatoday.com)