Today someone in America is retiring. In fact, starting back in January of 2011 some 10,000 individuals a day are retiring. The baby boomer generation, born between 1946 and 1964, are now making decisions that will have a lasting impact on this next phase of their lives. These individuals will have a higher income than their parents and for the most part, they will have a higher education level.
According to the Social Security Administration, a woman born in 1945 will have an average life expectancy after age 65 of 14.4 years; for a man, it’s 12.6 years. When they retire, two things will happen: They will apply for Social Security and upon doing so will be enrolled in Medicare.
Individuals planning retirement may want to evaluate their current risk tolerance to see where their finances would fit best. Most people approaching retirement have common concerns such as:
- Not maintaining current standard of living
- Health-care/prescription costs
- Availability of Social Security
- Outliving assets
- Inflation of U.S. dollar
- Market conditions/performance during retirement
- Leaving legacy for children/heirs
- Impact of taxes on income
- Paying for children’s education
- Caring for elderly parents.
Unlike previous generations, nearly 20 percent of American pre-retirees expect to continue working in retirement in order to supplement their retirement income or provide reasonable insurance coverage.
Lacking a plan
Only half (51 percent) of pre-retirees have actually completed a detailed retirement income plan according to some studies.
Some reports indicate 31 percent of those born between 1925 and 1945 still do not have a plan for retirement. Among those born between 1946 and 1955, 42percent lack a retirement income plan. The number is even higher at 53percent for those born between 1956 and 1964.
Pre-retirees are willing to make other sacrifices to have the type of retirement they want, including delaying retirement, saving more and continuing to work while in-retirement.
Soaring health-care costs
Rising health-care costs concern everyone and can potentially consume the largest portion of retirement income. But Medicare covers only a percentage of medical bills and prescriptions for all Americans, so out-of-pocket costs are likely to be large and growing in retirement.
Fact: A couple retiring today at age 65 will need an estimated $197,000 in savings to pay for their lifetime health care costs$260,000 if you include nursing home costs. Source: 2010 study conducted by the Center for Retirement Research at Boston College.
Then there’s the impact of taxes and inflation on retirees living on fixed incomes. When you look at the last 65 years, today’s top and lowest marginal tax rates are comparatively low. Increased government spending on health care and other initiatives, combined with rising deficits, and could mean a greater chance that taxes will move higher in the years ahead.