5 Reasons Why Retiring is Tougher Than It Used to Be

Today’s retirement may look nothing like your parents’ or grandparents’. People live longer, benefits grow thinner, and health-care costs rise. Review your financial situation and start planning early so that this new retirement doesn’t catch you unprepared.

The new environment you retire in is a very mixed bag – there’s good news, bad news and unpredictable elements. You can live longer than ever, and stay active into your 70s, 80s and beyond. But to support a longer life, you may end up working long past 65, even if you are reluctant to. Your aging parents live longer and may need your help. Your adult children may need financial support, too.

All these challenges require more planning than ever. It’s never too early to begin thinking and planning for the new retirement. Times have changed:

1. You may work past 65. The average retirement age was 57 in the 1990s. Now it’s 62 and likely to continue to rise. It’s great to keep working if you love your job, but you may have to delay retirement or work part-time because of insufficient savings – even if you hate what you do and you can’t wait to retire.

2. You have a longer retirement to finance. A man reaching 65 today can expect to live until 84, and a woman 86, the Social Security Administration says. And those are just averages. You may have 30 years of retirement.

3. It may cost you more to be retired. My old 1990s financial planning textbook says your living expenses typically decrease 20 percent after you retire, but the new retirement carries a higher price tag – primarily from increased health-care costs. Ballooning medical expenses can quickly consume your savings.

4. You don’t plan for one person. Perhaps your parents are still alive when you retire. They may need a financial hand for medical and living expenses. Your children or grandchildren may still rely on your support, as young adults now take longer to reach financial independence.

5. Government benefits are spread thin. Social Security for higher income retirees may end up with a haircut. Medicare also may go this route, charging wealthier retirees more than poor retirees to avoid running out of funds.

Facing this new retirement, you need Social Security alternatives and an investment portfolio that funds expenses for 30 or more years. You need to rebalance and reconfigure that portfolio regularly to take on board falling or rising interest rates, inflation or deflation and higher or lower stock markets. The new retirement may also mean moving to a less expensive or more tax-advantaged state – or out of the U.S. altogether.

When I talk to my clients, one of their greatest fears is becoming a burden to their families. This is something smart planning can help avoid. It’s imprudent to retire without a clear understanding of your financial situation. Have a financial planner crunch out the numbers, and start preparing yourself for the new retirement.

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Written by Eve Kaplan, CFP, a fee-only advisor in Berkeley Heights, N.J. Kaplan Financial Advisors is a Registered Investment Advisor in New Jersey and New York.

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