We all have dreamed of life in retirement. Maybe you had visions of playing golf and enjoying sunsets at the beach in the Caribbean, sipping espresso on the streets of Milan, or having fun and spending some of your funds at an online casino in Australia. But with today’s fluctuating economy, dreams of retirement seem a bit more dreary as more people realize they are unprepared financially to stop working.
According to the Washington Post, this is “the new reality of old age.” In the article, a 74-year-old man was quoted as saying he will need to work until he dies. In fact, for those of us who are already retired, a Fidelity study found that 55 percent are at risk of running out of money before their lives end. In other words, more than half of those surveyed are not prepared for life in retirement.
Most businesses no longer offer pensions, so retirees must rely more on their savings. People also need to rely more on Social Security, but Social Security replaces usually only 40 percent of a person’s pre-retirement earnings. In addition, according to Social Security, they have shared on their website that they may end up paying 75 cents on the dollar in 2033.
So is it even possible to retire in today’s economy?
The answer is “yes,” as long as you are careful as you near, and enter the retirement phase of your life. With more and more people living well into in their 90’s—you have to plan to live a lot longer.
Here are some tips to help retirees and pre-retirees protect and grow their money:
Know when to take Social Security.
If you don’t choose the most advantageous time to start drawing Social Security, you could leave a lot of money on the table. Several factors can come into play here depending on your personal situation, so it’s best to seek professional advice. Employees at your local Social Security office generally aren’t equipped to give you that kind of advice.
Live by the “Rule of 100.”
This is critically important. In the investing world, the “Rule of 100” says that the percentage of a person’s portfolio that should be in stocks should be equal to 100 minus their age. So, for example, someone who is 60 should have 40 percent of their portfolio in stocks and the other 60 percent should be in bonds or other lower-risk investments.
Plan for long-term care.
A person who turns 65 today has nearly a 70 percent chance of needing some type of long-term care services at some point, according to the U.S. Department of Health and Human Services. The cost can be devastating, so it’s important to plan financially for this likely eventuality. One option is long-term care insurance. Sometimes people expect a family member to take care of them in these situations, but do not not to be a burden to someone else.
Although the economy is doing well now, we all know from experience that this situation is not going to last forever. The closer you are to retirement–or are currently in retirement–the less time you have to recover from a downturn in the market. No one wants to be forced to continue working in retirement or to change their lifestyle because they experienced major erosion in their retirement portfolio due to circumstances beyond their control.