Are You Prepared to Live to 100?

January 19, 2023
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With life expectancy rates increasing, an abundance of information at everyone’s fingertips and more options than ever before, it can be difficult to know where to start when it comes to planning your retirement. While the possibilities may seem endless, adding a little structure and organization to the thought process can provide you with clarity and direction—and help you answer some important questions: What if you live to 100? Will your retirement benefits last that long? Are you prepared for unexpected scenarios? What will you do if things don’t go according to plan?

Proper financial planning looks at your current and future situation from a variety of perspectives.

By focusing on these key aspects of retirement, you can be prepared to have a holistic conversation with your financial advisor and estate attorney that covers all your retirement bases.

Retirement Benefits

As you get closer to retirement, it’s important that you understand all of the benefits available to you as well as how to utilize them best. Having a plan for when you’re going to start taking Social Security or pensions is important because it affects all other aspects of your retirement. Make a list of all retirement benefits and income you plan on utilizing. This includes both defined benefit plans and defined contribution plans, such as:

  • 401(k) plans
  • 403(b) plans
  • IRAs
  • Profit sharing or stock bonus plans
  • Employee stock ownership plans
  • Cash balance plans
  • Simplified employee pension plans

It’s also important to be aware of hidden fees associated with certain benefits. For example, Medicare beneficiaries earning over $91,000 per year in 2022 who are enrolled in Medicare Part B and/or Part D must pay an Income-Related Monthly Adjusted Amount (IRMAA) surcharge in addition to their monthly premium for Medicare.

Talking with a financial advisor is one of the best ways to make sure that you know what to expect when it comes to the hidden fees you may not be expecting.

Investment Considerations

There are many considerations when it comes to investment planning. How you manage investments depends on your age, your risk tolerance and your investment goals. You may think that as you age, you will need to reduce your overall equity exposure. However, this isn’t always true. Each situation is different, but you need to think about a 30-year retirement just like you would think about a 30-year career.

You need to stay invested for the long term, and inflation has historically eaten away at conservative assets more than aggressive assets over long retirements. Being prepared to live to 100 makes it even more important. When you have the right plan in place, you can see how small changes to your investments can have large long-term impacts. By understanding the timing of when assets will be used, you can start to think about creating long term plans for certain assets, while also knowing that your current-use assets are available as needed. Your investment plan should be set up to meet your goals and having an investment advisor is a good way to know you’re making the right plan for you.

Healthcare and Other Unexpected Costs

Life can be unexpected, and you can’t always foresee medical emergencies. You want to make sure that if something were to happen that causes an unexpected medical expense that you’re set up to financially recover quickly. Having an emergency fund equaling to at least 6 months of annual income is a good thing to have in case of an emergency.

The insurance you get during retirement should depend on several factors, including what you are trying to protect and your net worth. It may not be necessary to spend extra money on certain insurances. As risky as it is to not have insurance, it’s equally as risky to pay for insurance that’s not right for you.

For example, if you have $500,000 a year in income, does it matter if specialized nursing facilities or caregivers take $200,000 a year when you were going to spend that amount living anyway? In this specific scenario, Long-Term Care (LTC) insurance may not make the most sense. Taking a look at the overall picture and how it impacts decisions is key. An insurance professional will be able to guide you in the right direction in deciding what insurance is going to be best for your needs.

Planning your Estate and Legacy

It’s not easy to talk about and plan for what happens to your estate after you’re gone, but it’s important for your loved ones to know what your wishes are. Working with your legal and financial advisors on estate planning will help ensure the process goes smoothly and nothing important gets missed.

It’s paramount to have both a healthcare and financial power of attorney. These people will act on your behalf in your absence and will make the difficult decisions regarding your medical care or finances.

It’s never too early to have an estate plan and never too early to look over that plan to confirm it’s up to date.

The Bottom Line

Working with a team of legal and financial advisors helps to ensure a cohesive retirement and estate planning process resulting in a holistic plan that covers all of your retirement bases. There’s no one-size-fits-all approach to retirement. Having a plan that is unique to your situation is essential so that you are setting yourself up for success in your retirement years.

The Key to a Successful Retirement:

  1. Work with a team of advisors to create a plan.
  2. Know your goals in retirement.
  3. Continually review your plan and make changes when necessary.
  4. Enjoy your retirement.
  5. Meet regularly with your advisor to ensure your plan is up to date.

All investing involves risk and there is no guarantee that any strategy will ultimately be successful. Past performance is not necessarily indicative of future results.

Take this 10-question quiz to find out if you’re retirement ready.

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