Starting early, planning for health care and considering work are all important retirement planning considerations.
With pensions and employer-sponsored retirement plans becoming fewer and farther between, retirement planning is playing a more prominent role for many Americans.
But with a new approach to retirement planning in the current economic environment come new woes, as well.
Among them: working in retirement. A lot of working. Work in retirement may sound like something of an oxymoron, but well more than half of workers 50 and over say they plan to work past the age of 65, according to a recent survey by AARP. And of those surveyed, a full 18% plan to never retire. Yes, never.
Whether you plan to work in retirement or not, it’s important to acknowledge some of the new woes associated with retirement planning in this day and age.
1. Saving for health care
A recent health care overhaul has netted new rules and new costs of healthcare for older Americans. In the AARP survey, 38% of workers who are 50 and older reported they are not saving for health care costs.
AARP retirement expert Jean Setzfand used a calculator to determine her health care expenses over 30 years of retirement, finding a grand total of around $311,000 in out-of-pocket expenses.
“Most of the sticker shock comes from the cost of premiums, deductibles and coinsurance requirements,” Stezfand writes.
Most expenses come toward the very end of a retiree’s life, making it even more difficult to plan for.
“The unpredictability of one’s health as we move through and particularly in the later years makes it a very difficult variable to plan for—perhaps the most difficult,” Andy Sieg, head of global wealth and retirement solutions at Merrill Lynch told USA Today in a recent article.
2. Starting earlier
It’s never too late to start planning for retirement, but it’s also never too early, experts say. Especially today, with many Americans being entirely on their own when it comes to retirement planning.
According to the AARP survey, 68% believe one should begin saving at 35 years old or younger. But, only 28% of non-retires actually began saving at that age.
For today’s pre-retirees, planning early comes with some considerations: pay off student loans, but don’t pay off low-interest federal debt too early. Seek a Roth IRA if a 401(k) is not offered through your employer. Take advantage of a 401(k) if it is offered. Take advantage of any employer match that is available. Don’t touch your retirement savings.
“It can be hard to focus on something that’s decades in the future, so it helps to show them how dramatic a difference it makes when they start saving in their 20s versus their 30s or 40s,” Gil Armour, a certified financial planner with SagePoint Financial, tells CNBC.
3. Finding (and planning for) work in retirement
The need to find work in retirement is a new woe for many who have either been out of the workforce already, or who lack skills to compete in today’s marketplace.
For those, like many interviewed by AARP, who are planning to work in retirement, there are also financial consideration such as impact on pension and Social Security.
But work in retirement can also serve as a benefit in one important way: health care coverage. If your job provides health care coverage, it may help offset some health care expenses.
The new retirement woes can be overwhelming, but financial planners can help. Whether you are starting to plan early, or are like many Americans planning to go back to work in retirement, consult a financial planner who can help advise you so these new woes don’t take hold of your plans.
How to prepare?
An online retirement calculator can help you assess these issues (how much to save, healthcare costs and working in retirement) and much more.
