Retirement and estate planning can be stressful and difficult. So, it’s not surprising that Americans often times hold off on these tasks. But, if you don’t take the time to consider financial matters related to retirement years and beyond now, you could find yourself with little to live on in the future.
Social Security Benefit Average Barely Above Poverty Level
As of early 2017, the average Social Security retirement benefit pays only $1,315 per month; multiply that across the year and it represents an annual income of $15,780. That’s only about $4,000 over the federal poverty level for an individual person, making it a difficult amount to live on for most people. Couple that with the fact that Social Security benefits aren’t fully secured for the decades to come, and it’s probably obvious that you’ll need to supplement any benefits you receive with other forms of retirement income. Most experts suggest making Social Security benefits no more than 40 percent of your post-retirement income stream.
The Average American Isn’t Saving Enough for Retirement
Given that you’ll need to make up 60 percent of your income via savings, investments and other measures, most Americans aren’t saving enough. According to PricewaterhouseCoopers, half of all baby boomers have saved less than $100,000 for retirement and a third have accumulated less than $50,000.
While that certainly sounds like a lot — with $100,000 and the right deal, you could buy a house — even the most frugal, self-sustaining people might have a hard time stretching those funds over what could be dozens of years in retirement. Most professionals recommend that you calculate your post-retirement financial needs using 80 percent of your pre-retirement income. If you make $40,000 per year now, you’ll likely need $32,000 per year when you retire. Even subtracting potential average Social Security benefits, you still need roughly $16,000 in income annually; under the best circumstances, a hundred grand in savings would be gone within four years.
Health Care Costs Can Wipe Out Savings
Medical costs are a big concern for those nearing retirement age. On average, health care costs are expected to be about $260,000 for couples entering retirement in 2016. A couple of hospital stays or some pricey prescriptions could quickly put a dent in your savings unless you’ve planned ahead. One way to mitigate the financial damage of medical issues is to ensure you enter retirement backed by strong insurance policies. Medicare might pay for a lot of benefits, but it’s a good idea to have a secondary insurance and long-term care policy too.
It’s hard to look into the future with any clarity, but one thing’s true for every person: planning now helps create a stable foundation for finances during retirement. Part of that plan might include investing in gold, which is one retirement asset you can reasonably expect to grow in value and pay out as expected.