Long gone are the days of comfortable living off of a pension and Social Security benefits. The retirement landscape has changed from when our parents were planning for retirement. Today’s retirees often contribute to a retirement plan for many years, and unfortunately, many will find themselves needing to continue working to make ends meet.
despite what the statistics tell us, we believe those with clear goals and dedication to their financial future can enter into retirement with confidence.
Can I Count on Social Security?
We’ve heard the advice of not relying on Social Security followed by overarching statements about the funds drying up and the benefits program disappearing. So, how long will Social Security remain solvent? And what about the next generation, will the program see changes that will affect your grandchildren? Maybe. But the Social Security Board of Trustees publishes their projected surplus and deficit on an annual basis. The 2023 figures show a 3.61% projected actuarial deficit over the next 75 years.
The way it stands today, there’s a chance a benefits reduction could be necessary in the coming years to come. The pressure on the system today revolves around the large number of benefit recipients. The percentage of our population that is collecting benefits has risen in comparison to the number of working Americans paying into the system.
Overcoming the deficit could be handled in many ways. Changes to eligibility, a rise in payroll taxes, and a reduction in benefits are all ways the program could navigate closing the projected deficit, but only time will tell. Regardless of your personal beliefs or political stance, you should not have fears about not receiving Social Security.
That said, for most Americans, Social Security only covers about 30% of pre-retirement income. This is why it’s so important to check in with the SSA to understand what your expected benefit will be, and then re-check from time to time as you approach your retirement date.
Pension Benefits are No Longer the Norm
The days of generous pension plans are long gone for most. It’s estimated that only about 20% of Americans have pensions. Pensions do still exist but are often limited to a few industries such as utilities, government jobs, education, and the military. The inception of the 401(k) in the late 70’s led to the shift in retirement benefits, which also came with a shift in responsibility. With pensions, the employer was responsible for managing the funds, investments, and payouts. With the 401(k), the employee enters the driver's seat. Individuals are largely responsible for building their own retirement fund, often with a bit of assistance from the employer in the form of 401(k) contributions.
Health Care and Changing Family Dynamics
It wouldn’t be a retirement planning article without talking about the cost of healthcare. Health care costs are on the rise, long-term care costs are on the rise, and life expectancy is longer today than it was for our parents or grandparents. This combination is understandably concerning for today’s retirees.
Dig into recent studies and you’ll find varying figures as everyone's medical expenses vary, but there’s a theme. It’s common for retirees to spend upwards of $300,000 on out-of-pocket medical expenses over the span of their retirement years or more. While Medicare is a low-cost plan, heading into retirement thinking you won't have additional expenses would be naive.
There’s no way around it, health care must be a part of your retirement plan. It’s important to understand what Medicare does and does not cover. Beyond that, put thought into what you want your later years to look like. Understanding the cost of a retirement home compared to relying on family to chip in with your care needs are two very different circumstances, financially.
If you have thoughts of remaining in your home or the hope that a family member will provide care, it’s important to hold those conversations. There’s no right or wrong answer here, we simply encourage you to consider the time obligation associated with your desires and the financial requirements of each option you’re considering.
Securing Your Retirement
Secure retirements still exist, we help people reach their goals each year. While there are added complexities today compared to generations past, a good plan can combat the challenges that lie in front of today’s retirees.
To learn more about how we can help you establish a plan geared towards reaching your retirement goals, schedule a meeting with our Certified Financial Planner™ today.
About Integrated Wealth Management
Integrated Wealth Management is owned by Burt Hutchinson, CPA, CFP®. We’re a CPA-led organization, meaning we’re here to handle your complex tax scenarios and provide cost-saving insight related to your financial plan.
We’re here to guide you through the 3 stages of retirement:
Uncertainty Stage: When you are within 10 years of retirement and have questions about how to make it work
Stability Stage: When you have reached the financial milestone to retire comfortably and confidently
Reflection Stage: When you are looking to leave a legacy
We are also here to provide experienced, empathetic support during times of loss, such as the death of a life partner. You need confidence and a sense of security to enjoy retirement. As fiduciaries with a fee-only structure, we never receive commissions. Free of ulterior motives, you can be sure we’re focused on your goals.
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Disclosure Statement:
This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax, or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, Past performance is not a guarantee of future results.