The Seven Retirement Challenges

1. The Age Challenge

In one word LONGEVITY. In the ancient past the average female lived to reach the age of 49 and the average male aged to about age 46. Retirement wasn’t a very common thing. What a difference a 100 years can make! The average lifespan of the average American today is 77.2 years. In fact according to the U.S Census Bureau the population aged 65 and over grew five times faster than the total population over the last 100 years. In 2020 about 1 in 6 of the population was 65 and over. The number was less than 1 in 20 in 1920. How financially prepared are you for longevity? Have you taken steps to guarantee you’ll never run out of money no matter how long you live?

2. The Extinct Pension

Less than 1/3 of working Americans are covered by a pension. In our current retirement landscape the 401k is the dominant retirement plan. A 401k is not designed to provide you guaranteed income in retirement. Where is your income coming from in retirement?

3. Social Security Shortfalls

Social Security is a cause for growing concern. It was initially created to provide supplemental income to a handful of Americans. In 1935 the average life expectancy was 63 and this benefit didn’t even begin paying until age 65! Today the average monthly Social Security benefit is $1,830.66 or $21,967.92 annually. The national average cost of living according to the Bureau of Labor and Statistics is $66,928. 4 in 10 Americans rely on Social Security for 50% of their income and 1 in 7 rely on it for 90% of their income. As funding falls short and people live longer benefits may be reduced and qualifying age requirements may be increased. How much of your retirement income planning is reliant on the government and how much do you have within your control?

4. The Tax Chop

What is your largest expense? For the average American their largest expense while working is taxes! For many people this continues to be the case in retirement. Taxes are a constant. How are taxes affecting your current retirement savings and investments? How will taxes affect your retirement withdrawals, income, and maybe your beneficiaries? As one of the two sure things in life. Taxes should definitely be a part of your retirement plan considerations.

5. The Invisible Enemy

INFLATION. Many people fail to fully grasp the extent to which inflation can erode the future buying power of their existing savings. If we are overly cautious, the value of today’s dollars can crumble into nothingness tomorrow. More money has been added to the U.S money supply from 2020 to 2022 than any two year period in the country’s history. You don’t need to be an economist to understand that when governments print money to cover expenses, inflation is always just around the corner. The only way to beat this enemy is to outperform it. Where do you keep your “safe money”? Can the rate of growth of that vehicle outpace inflation?

6. Cost of Healthcare

It is estimated that more than 60 percent of Seniors will need some type of Long Term Care. The average costs for long term care in America (in 2020) are:

● $225 a day or $6,844 per month for a semi-private room in a nursing home

● $253 a day or $7,698 per month for a private room in a nursing home

● $119 a day or $3,628 per month for care in an assisted living facility (for a one-bedroom unit)

● $20.50 an hour for a health aide

● $20 an hour for homemaker services

● $68 per day for services in an adult day health care center

As working Americans, we should strive to accumulate enough assets to secure our own well-being, no matter the circumstances—whether we’re sick or healthy. A properly designed retirement plan may allow you to retain your wealth and not force you to “spend-down” your assets if you need to qualify for Medicare.

7. Stock Market Risk

This challenge is different from the others because it is something that is totally in our control. Unfortunately, what makes this challenge so difficult is the fact that it is 100% in our control. Two traits can contribute to us making investment blunders when investing for retirement. The first trait is greed. Our tendency is to swing for the fences and take excessive risks in the market. But this often results in meager overall returns and, in certain instances, complete financial devastation. The second trait is fear. When the market starts going down, investors usually get scared and sell, thinking they will lose money. Then, when the market bounces back and reaches its highest point, they rush to buy. This is the complete opposite of the basic idea of “buy low and sell high”. Sadly, it’s a harsh reality that greatly reduces the overall returns of the average stock market investor and barely helps them keep up with inflation. The return of your money will always be more important than the return on your money! Many retirees and pre-retirees are getting too old to risk losing even a penny. They don’t have enough time to recover should the market have a decline like it did in 2000, 2008, 2015, 2018, and 2022. This is especially true if they are not contributing to their retirement plan or will stop contributing soon. In the long run the market does typically bounce back. The big question is…can you afford to hold out for the long run? The market is risky and uncertain. Yet fixed interest accounts may have trouble keeping up with inflation.
Indexed Annuities can help you meet each of these challenges head on. Learn what an Indexed Annuity is and how it can help you to address each one of these challenges in your own retirement planning.