None of us has a crystal ball, so when we look ahead to our retirement years we have to make some educated assumptions about all sorts of things – where our money will come from, how healthy we’ll be, and how much our kids will be involved in our lives, just to name a few. But here’s a cautionary note from a provocative article that we ran across last year on the Kiplinger financial website. The article warns us about the dangers of basing our retirement planning on false assumptions – the kind of assumptions that, according to Kiplinger, could sabotage our retirement future.
Dangerous Assumptions Bring a False Sense of Security
The Kiplinger article is written by financial columnist and blogger Matt Bell. “I’m sure it isn’t news to you that many people are not saving enough for retirement,” Bell says. “For some, there just doesn’t seem to be enough money to pay the bills and save. However, for others, faulty assumptions may be to blame.” The point of the article is simple but important: don’t allow unrealistic assumptions and wishful thinking to lull you into a false sense of security about your future, especially in the areas of your money, your health and your family. You need to prepare for your retirement years with your eyes wide open, so to speak, and that’s something with which we at AgingOptions can definitely assist you. We’ll explain more on that in a moment, but first, let’s examine these four false, even dangerous assumptions. Are you at risk of letting these lead you astray as you plan for your future?
Dangerous Assumptions about Work and Finances
The first false assumption, according to Kiplinger, involves the wishful statement, “I’ll be able to earn income as long as I’d like to.” This is a common wish of most workers, and it’s an admirable goal, but a hard look at employment statistics makes it appear that the employment hopes of many seniors are simply not going to be realized. The Employee Benefit Research Institute (EBRI) reports that about 80 percent of workers say they plan to work for pay after they retire. But when you look at how many of today’s retirees have actually worked for pay after retirement, the real-life figure is closer to 30 percent. The same organization reveals that almost 40 percent of workers expect to retire at age 70 or later. But among today’s retirees, the reality does not match expectations: only about 4 percent actually remained in the workforce until age 70 or older. “What should you do?” asks Kiplinger. “Instead of counting on paid work in your later years, plan financially to retire at the typical retirement age.” But keep your work skills sharp. That way, if you want to work and have the opportunity, you’ll be ready.
The second false assumption, one that reflects our recent economic experience, is that inflation will always be low. “While the cost of living has only been increasing at a relatively moderate rate in recent years,” writes Kiplinger, “even a 2 percent rise means $500 worth of groceries today will cost about $600 in 10 years. And who knows how long inflation will stay low?” This is where sound financial planning comes into the picture. It’s unrealistic, for example, simply “to take your total nest egg and divide it by the number of years you think you might live.” You may think that’s a sound approach to financial planning, but if you ignore the erosive impact of inflation, you do so at your peril. (Inflationary fears are a major factor in the periodic volatility of the stock market.)
Dangerous Assumptions about Health and Family
What about your health? The Kiplinger article warns against the dangerous assumption that I’ll always be healthy. “When you’re in good health, it’s hard to imagine ever becoming seriously ill,” says Matt Bell in Kiplinger. “Heart attacks, strokes, cancer, and dementia only happen to other people, right?” But the fact is, according to the National Association of Insurance Commissions, over half of people turning 65 today will need some form of long-term care at some point in their remaining years. Illnesses like dementia are on the rise. The article advises some specific strategies, including buying long-term care insurance and maximizing your contributions to health savings accounts, and while these may be valid strategies for some, there’s no one-size-fits-all recommendation – which is why we urge you instead to consider a more comprehensive planning approach, one which we’ll discuss in a moment.
The final false assumption from the Kiplinger article is one we hear frequently at AgingOptions: If I ever do become seriously ill, my kids will be there for me. “If you’re like most people,” writes Bell, “you’ll probably prefer to avoid living in a nursing home, but what other options would you have?” For many seniors, the hope is to have their adult kids help with in-home care – and while that’s a viable option for some families, for many others it’s simply unworkable and unrealistic. “How old will [your kids] be when you are 80 or 90? Will they be available, or will they be busy building their careers, raising their own kids, or both? Are they likely to live near you? Counting on your adult kids to help care for you may be counting on too much.” This fact alone is one reason why we at AgingOptions strongly advise you to let us host a family conference for you so that we can help guide you and your loved ones through an honest discussion of this vitally important topic. It also makes planning for your future housing needs even more imperative.
Dangerous Assumptions are Replaced by Sound Planning
Part of the challenge in sound retirement planning lies in eliminating as much of the guesswork as we possibly can, which is why we advocate that you replace these and other false and dangerous retirement assumptions with a truly comprehensive retirement plan: an AgingOptions LifePlan. As the Kiplinger article says, false assumptions about finances, family and health can devastate your retirement – and the same thing can happen if you leave yourself legally or medically unprotected and unprepared. Only a LifePlan takes all these elements into account so that you can face the future with your assets protected, knowing you’ll be able to avoid being forced against your will into institutional care or becoming a burden to those you love.
To find out more about this financial planning breakthrough, join Rajiv Nagaich at a free LifePlanning Seminar. We guarantee that the few hours you invest will be time well spent. For details and online registration, click here to visit our Live Events page, or call us for assistance during the week. Don’t base your future on false assumptions. Instead, rely on the solid foundation of a LifePlan from AgingOptions. Age on!
(originally reported at www.kiplinger.com)