Introduction to Managing Healthcare Costs

As you approach retirement, you hope to enjoy your time without stress. However, high healthcare costs can quickly deplete your savings. Therefore, it’s crucial to include these expenses in your retirement planning. Annuities offer a reliable solution by providing a steady income to cover healthcare needs.

Understanding Medicare

For most Americans over 65, Medicare serves as the primary health insurance. It provides substantial support but does not cover everything. Notably, Medicare excludes services such as dental, vision, and hearing care. It also involves co-pays and deductibles. Consequently, some retirees opt for additional insurance like Medigap or Medicare Advantage to fill these gaps, although these plans come with additional costs.

Why Annuities Help

Annuities are particularly effective for managing medical expenses in retirement. By converting some of your savings into regular payments, annuities ensure that you always have funds available to meet medical costs.

Consistent Money
One of the key benefits of an annuity is that it delivers a consistent monthly income for life. This reliability is invaluable as it allows you to manage your budget more effectively. With this steady income, you can comfortably handle regular medical expenses and unexpected health issues alike.

Protecting Your Future

As you age, it is common for healthcare costs to increase. Annuities offer a form of protection against the risk of depleting your resources, ensuring you continue to receive income throughout your later years, which is often when you need it most for healthcare.

Growing Your Money
Additionally, some annuities have the potential to grow based on stock market performance. This growth can be crucial in years when the market performs well, providing extra funds that can help cover unexpected healthcare expenses.

Tax Benefits
Moreover, annuities provide significant tax advantages. The investment within an annuity accumulates tax-deferred, meaning you don’t pay taxes on the earnings until you withdraw the funds. This arrangement allows your money to grow more efficiently and increases the amount available for healthcare when required.

How to Use Annuities for Healthcare Costs

To effectively incorporate annuities into your healthcare financial strategy, consider the following steps:

• Assess Your Health Needs: Firstly, evaluate your current health and potential future needs. Take into account your family health history and any existing conditions.
• Review Your Savings: Next, examine your total savings and income sources. This review will help you determine how much you can allocate towards healthcare expenses.
• Consult with Experts: Additionally, speak with financial advisors who specialize in retirement and healthcare planning. They can provide valuable insights into choosing the right annuity for your situation.
• Select the Best Annuity: Choose an annuity that aligns with your financial goals and risk tolerance. There are various types of annuities available, so select one that best meets your needs.
• Monitor and Adjust Your Plan: Finally, it’s important to regularly review your annuity’s performance and your overall financial plan. Make adjustments as necessary to ensure it continues to meet your healthcare needs.

Conclusion
Managing healthcare costs effectively is crucial for a secure and stress-free retirement. Given the rising costs and limitations of Medicare, having a solid financial strategy is essential. Annuities provide a dependable way to ensure a continuous income throughout retirement. By planning carefully and incorporating annuities into your financial planning, you can safeguard your financial future and enjoy your retirement years without the burden of healthcare worries. This proactive approach ensures you are prepared for unexpected costs and offers peace of mind as you age.

Looking for Guidance?

If you’re seeking personalized advice, consider reaching out to a financial professional.. Get started by visiting our “Find a Financial Professional” section, where you can connect with someone directly. If you would like a personal referral for a first appointment, please call us at 877.476.9723 of contact us here to schedule an appointment with an independent trusted and licensed financial professional.

Authored by Brent Meyer, founder and president of SafeMoney.com, with over 20 years of experience in retirement planning and annuities. Learn more about my extensive background and expertise here

The post Managing Healthcare Costs in Retirement first appeared on SafeMoney.com.

This can be a tricky way to see if you are financially on track. If the goal is set too low, there is the risk of being overconfident and undershooting how much you will really need. If it’s set too high, then people may become discouraged and not do anything. The bottom-line is that retirement savings goals at different ages need to be practical and realistic.

In this article, we will look at simple target retirement savings goals at five key ages: 25, 35, 45, 55, and 65. That will span exploring how much the average American has saved for retirement at these ages, and how much you might want to have saved at those points. We will also go over some things to consider with your financial planning as you get closer to retirement.

A Quick Word on Typical Retirement Savings by Age

How much do people have saved up at various ages? To answer this question, we looked at data taken from the Survey of Consumer Finances, which is put out by the Federal Reserve. This data covers the average retirement savings and median retirement savings by age group.

Average retirement savings are a glimpse into how much that people have typically saved at various age groups. However, averages can also be skewed by outliers — by the undersavers and the oversavers in each group. Because of that, median retirement savings are also included for each age group.

How Much Do Americans Have Saved for Retirement at Different Ages?

Here is a quick breakdown of average and median household retirement savings for different age groups. It’s helpful as a starting point to see where people are typically at in different points of their retirement financial progress.

Under Age 35

• Average retirement savings for household: $30,170
• Median retirement savings for household: $13,000

As we can imagine, retirement savings aren’t terribly high at this point. These numbers are relatively low due to the early stage of people’s careers and other financial obligations.

Ages 35-44

• Average retirement savings for household: $131,950
• Median retirement savings for household: $60,000

Those in their mid-30s and early 40s tend to have more financial stability than in their 20s. These amounts reflect this, thanks to higher earning potential and better financial management.

Ages 45-54

• Average retirement savings for household: $254,720
• Median retirement savings for household: $100,000

These amounts reflect the wide variation that people in their 40s can make in individual life choices, career paths, and earning tracks depending on the jobs they have held. The 50s are when career-earning years tend to peak.

Ages 55-64

• Average retirement savings for household: $408,420
• Median retirement savings for household: $134,000

By this point, retirement is nearing. Your retirement savings have had time to grow in value, and your contributions to your retirement account(s) over the years will have added up. If you need to make catch-up contributions so that you have enough income for retirement, now is the time to do so.

Ages 65-74

• Average retirement savings for household: $426,070
• Median retirement savings for household: $164,000

Age 25: Getting Started

At the age of 25, retirement may seem distant, but it’s the perfect time to start investing. Compounding growth can be of huge benefit to early savers. In fact, starting at this age may mean that you might be able to save less in later years due to your money having more time to grow. So, it can be really beneficial to begin ramping up now.

The average American in their mid-20s may not have substantial retirement savings due to competing financial priorities like student loans, rent, transportation, or job-related spending. Entry-level salaries can also make it hard to sock money away when much of your income is going toward monthly expenses.

Retirement Savings Goal at Age 25: Financial experts recommend having at least one year’s worth of salary saved by age 30. If you earn $50,000 annually, your goal should be $50,000 in retirement savings by 30. This may seem ambitious, but the earlier you start, the easier it is to reach this milestone.

Age 35: Building Momentum

By age 35, finances should be more stable and your career more established. It’s a good time to scale up your retirement savings efforts and take advantage of any qualified workplace retirement plans, such as a 401(k).

If you are maxing out your contributions to your workplace retirement plan, then explore additional ways to build up savings. IRAs and Roth IRAs are other options for accumulating more retirement money for later years.

Retirement Savings Goal at Age 35: By age 35, you should aim to have saved at least twice your annual salary for retirement. If your annual income is $60,000, your retirement savings goal should be $120,000 by age 35.

Age 45: Mid-Career Milestone

As you reach your mid-40s, your financial responsibilities may include mortgage payments, children’s education, and other life expenses. While these financial obligations will take your attention, saving for retirement shouldn’t be ignored.

You are getting closer to your peak earning years. This is the time to take advantage of your higher earnings and still having some time for your retirement savings to grow.

Retirement Savings Goal at Age 45: By age 45, financial experts recommend having at least four times your annual salary saved for retirement. If you earn $80,000 annually, your goal should be $320,000 in retirement savings by age 45.

Age 55: Nearing Retirement

As you move into your mid-50s, retirement comes into sharper focus. You are well-placed to assess your retirement readiness and make any needed changes to your savings and investment strategies.

Retirement Savings Goal at Age 55: By age 55, you should aim to have at least six to seven times your annual salary saved for retirement. If your annual income is $100,000, your goal should be $600,000 to $700,000 in retirement savings by age 55.

Age 65: Retirement on the Horizon

By age 65, retirement is typically just around the corner, and it’s crucial to have a clear plan in place. Hopefully you have built up a sizable nest egg so that you can have a financially comfortable lifestyle in retirement.

But of course, it’s not just about how much you have saved for retirement. At this stage, how much income will you be able to generate from your retirement investment holdings? What if you don’t yet quite have the funds to generate the retirement income that you will need?

If that is the case, consider delaying retirement and working for a longer period, if you can. It would give you more time to build up retirement funds, more opportunity for your savings to grow, and fewer years for you to have to fund in retirement.

Retirement Savings Goal at Age 65: By age 65, the general rule of thumb is to have saved at least ten times your annual salary for retirement. If your annual income is $120,000, your goal should be $1.2 million in retirement savings by age 65.

Don’t Focus on Just the Savings When Near Retirement

In your working years, the focus is on saving money and growing your funds in value. As you near retirement, financial priorities change. It’s more important at that stage to protect the financial resources that you have and determine how you will create reliable income streams from them. After all, you want enough income to support your desired lifestyle throughout your retirement years.

Here are some essential steps to consider as you approach retirement:

Evaluate Your Savings: Take a close look at your retirement savings and assess whether you have reached your savings goals for your age. Near retirement, that starts with charting out what your income needs and spending in retirement will probably look like. If you haven’t reached your goals, consider making catch-up contributions to your workplace retirement plan and personal retirement accounts, like IRAs.

Budgeting and Lifestyle Choices: Create a detailed retirement budget to determine how much income you will need. Make decisions about where you will live, travel plans, and other lifestyle choices that can impact your expenses.

Social Security Planning: Understand your Social Security benefits and the best time to start claiming them. Delaying benefits can lead to higher monthly payouts.

Pension and Other Income Sources: If you have a pension or other income sources, factor them into your retirement income plan. Ensure you understand how these income streams work and when they will become available.

Healthcare Costs: Estimate your healthcare costs during retirement and explore options for health insurance coverage, such as Medicare or private insurance. Don’t forget about long-term care expenses, which are separate from medical costs and not really covered by Medicare.

Investment Allocation: The question of how much market risk that your investment holdings carry becomes more important as you get closer to retirement. Depending on your current risk profile, you may want to adjust your investment portfolio with that risk exposure. Consider shifting towards more conservative investments and financial instruments to help protect your nest egg.

Professional Guidance: Retirement income planning is complicated. Consult a financial advisor or retirement planner to help you navigate the complexities of retirement, income planning, capital preservation, and to optimize your financial strategy.

The Bottom-Line on Setting Retirement Savings Goals

At every point of your working years, saving for retirement is crucial, and the earlier you start, the better off you will be. As we have seen at ages 25, 35, 45, 55, and 65, the average American’s retirement savings varies significantly. Still, those average and median retirement savings at different ages can be useful guidelines for general savings goals.

As you near retirement, the focus shifts from accumulating savings to creating a reliable income stream. Proper planning, budgeting, and financial guidance are important steps in working to secure your financial future during retirement. By addressing these factors near retirement, you can enjoy the peace of mind that comes with knowing you have enough retirement income to support your preferred lifestyle.

Remember, it’s never too late to start planning ahead and taking steps toward a secure retirement lifestyle. There are many pieces to put together, and if you would like professional guidance in sorting everything out, many experienced and independent financial professionals are available here at SafeMoney.com.

You can connect with someone by visiting our “Find a Financial Professional” section and requesting a complimentary, initial appointment with someone. Feel free to ask any questions on your mind and discuss your goals, concerns, and situation at this point. Should you want a personal referral, please call us at 877.476.9723.

The post Target Retirement Savings Goals by Age: Are You on Track? first appeared on SafeMoney.com.

Older Americans tend to have less invested in stocks because they move their savings out of higher risk vehicles in their pre-retirement years. This is typically to protect their retirement nest egg, since they tend to have less time for recovery. Unfortunately, many Americans are still reeling from losses from the 2008 financial crisis. They are looking at a delayed retirement.

You can take steps to protect the financial gains your portfolio has enjoyed and start preserving your wealth for your retirement lifetime. This may call for a shift in financial focus — a start to evaluating safer retirement vehicles which have a lower risk profile than equities, like annuities and life insurance. It is a good idea to review your portfolio at least once a year, to review to make sure that your portfolio is meeting your goals, objectives, and expectations. As you approach retirement, you may want to begin to transfer your portfolio to a more risk-adverse position and realize any financial growth you’ve achieved before the markets make their natural corrections.

Why is Now the Time to Consider a Financial Shift?

If you and your partner are in your fifties, now is an important time. Those of us who are within 5-10 years of retirement, or even the first 5-10 years of our post-work timeline, are in what we call the “retirement red zone.” The decisions we make now will impact the rest of our lives, no matter what. This is a period of change, which tends to be different from the earlier stages of financial life.

For example, as retirement nears, your financial priorities may change. Your basic living expenses may decline as you pay off your mortgage or other debt. You and your partner may be empty nesters, or you may have fewer children living at home. Your target retirement timeline is drawing closer, and now holding onto what you’ve saved up is more important. With the markets at an all-time high, you may want to consider looking at strategies to preserve your hard-earned savings, so you maintain your spending power in retirement and live comfortably.

Why Should I Lock in My Financial Gains?

As mentioned above, you will want to consider a shift to a more risk-adverse portfolio as you approach retirement. This may involve taking your built-up wealth now and transferring them to more conservative options. This helps to maximize your retirement pot, protecting it at the tail-end of your peak earning potential. The stock markets have been performing well for some time. Economic history tells us that the markets are cyclical and that they will drop again before beginning another period of growth.

Many Americans suffered losses due to a drop in the value of equities in during the financial crisis of 2008. In one year, the stock market fell 42%, which resulted in $2 trillion of losses in defined-contribution plans. Recovering from this loss took a long time, and some people still have not replenished their nest eggs. As a result, many Americans are risk-adverse and are taking a more diverse and conservative approach to their retirement money.

These should not be deemed as scare tactics or imply that a downturn is on the horizon. It’s just a possibility. However, as you approach retirement, you should be taking steps to protect your nest egg and start deciding how you will use your nest egg for retirement income.

Closing Thoughts

It is important to remember that if you lock in your stock gains outside of a tax-advantaged account, you will generate taxable income. Furthermore, if you sell stocks within a year of purchasing them, any gains will be taxed at your highest personal tax rate. There are ways to protect yourself, such as holding onto stocks for a least a year or purchasing PUTs or setting a trailing stop order. But those are outside of this discussion, please be sure to work with qualified professionals for tax and financial advice on any such situations.

Whatever you choose to do to lock in your stock gains and to protect your retirement nest egg, it is important to work with a trusted financial professional. If you’re planning to retire at 65, you may be able to enjoy 30 years or even more of retirement. Since you are thinking about retirement and planning now, you are in a better position that most Americans over the age of 50. But you still need to make informed and considered decisions to protect your wealth and ensure you are financially prepared for retirement.

Ready for Personal Guidance?

If you’re ready for personal guidance with your retirement goals, you have access to knowledgeable financial professionals on SafeMoney.com. They can assess your financial picture, listen carefully to your needs, and give you personal help to reach your goals. Reach out today for guidance on how to preserve your accumulated wealth from this two-year market rally and perhaps lock in that growth – before the market drops!

Should you need a personal referral, please call us at 877.476.9723.

The post Is It Time to Lock in Those Stock Market Gains?! first appeared on SafeMoney.com.

Some couples may require a seven-figure nest egg to feel secure. Others are confident their Social Security benefits will be suitable for their future needs. Given how Americans have such a wide-ranging outlook on finances in retirement, how people interpret statistics such as average American household retirement savings will vary. What may be the start of a looming crisis for some may be a minor challenge for others.

With that said, you should develop an informed mindset toward your own finances. Then use this data to help judge your progress in retirement preparation. Let’s cover some important details regarding the current American retirement landscape below.

What Does the Average Household Have in Savings?

In June 2015, the U.S. Government Accountability Office released a report detailing the current financial status of households aged 55-64, among other factors. The findings were insightful:

• The average American household nest egg near retirement is $106,000
• The median American household near retirement has $10,000-20,000 in savings
• 41% of the households didn’t have any retirement savings at all

What about These Households Which Didn’t Save?

The picture may seem grim among the 41% of households with no retirement savings. However, there’s more than meets the eye. Consider the following data:

• In the 41% of households subset, 56% are homeowners, with 22% having their home fully paid for
• Having no mortgage eliminates a long-term debt holding which would put pressure on income in retirement
• Again in this subset, 32% of households have a defined-benefit plan (or pension)
• Report doesn’t account for how much these households will be receiving in future Social Security benefits
• Given the yearly income for this subset is $26,000, average Social Security benefits may replace over half of a household’s income in future
• If a household has two workers retiring or someone receiving spousal benefit, benefits can be even higher

What About Those Who Saved?

Among the 59% of households with savings:

• 7% have less than $10,000 saved
• 9% have over $500,000
• Median net-worth per household is $337,000
• 87% are homeowners, but just 27% have their home fully paid off
• 45% have a defined benefit plan, or a pension

What Does This Mean for Me?

As the statistics show, having no retirement savings by itself is hardly a comprehensive variable for judging a household’s preparation. This reality applies to each person’s finances as well. Some people will expect a higher standard of living than others. Some households will have elevated living costs compared to others located in different parts of the United States.

In the end, there’s no better method than to sit down and judge your financial picture in relation to your own future goals and needs. If you have a partner, it’s advisable to plan ahead together. Determine a target goal for what you need in retirement, how well you’re working towards that goal, and what future income sources will be available. And see if there are any other steps you can take — a financial professional can help bring clarity to this step.

Still Don’t Have a Plan? Take Action Now!

If you’re ready for personal attention with your retirement future, SafeMoney.com can help you. Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

The post Average American Household Savings Near Retirement first appeared on SafeMoney.com.

According to a survey conducted by BankRate.com, 36% of surveyed adults say they didn’t have a penny saved for retirement. Around 25% of the people aged 50-64 in the survey reported they had yet to start their retirement savings. These findings are consistent with data found in previous surveys. In fact, previous data shows there’s a wide gap between Americans’ retirement expectations and what they’re actually prepared for.

A big part of it is because many American households live paycheck to paycheck. So what steps can you implement to catch up on retirement savings? Read on for some helpful tips.

Effective Strategies for Catching Up on Retirement Savings

Here are some strategies that you can use to close the retirement savings gap.

Take advantage of tax-deferred accounts

One simple way is capitalizing on the benefits of a 401(k) and an IRA. Current annual contribution limits are set at $18,000 for a 401(k) and at $5,500 for an IRA.

If you’re over 50 years old, you can contribute up to an extra $6,000 into a 401(k) and an extra $1,000 into your IRA. Taking the money directly out of your paycheck will help you keep on track with your goal.

Consider alternative vehicles for stashing retirement savings

What about high-income earners or people with just a few years left over to catch up? Traditional retirement accounts have set contribution limits that make it more difficult to accelerate savings and keep it safe from taxation.

For people in this situation, other vehicles, such as annuities, can be used for tax-advantaged savings. They also offer the ability to help you meet retirement financial and income goals later on.

An annuity allows for additional, pre-tax savings to be put away. However, that doesn’t mean it is for everyone. Be sure to receive guidance from a qualified financial professional if considering this option.

Wipe out the debt

Saving is an optimal goal. But it’s also important to remember debt will continue to be a burden in retirement. If you work toward paying off long-term debts now, they will pose fewer constraints to your finances in the future. Experts recommend your home mortgage or vehicle loans as long-term debts on which to focus.

Lengthen the time you’re working

People who are currently retired or approaching retirement are opting to work longer. Part-time employment is a solid choice for income supplementation. It’s also another means of staying active and engaged in retirement.

If you’re still working, it may be worth it to consider a longer period of employment so you have greater earnings to contribute. On the flip side – if you’re considering employment in retirement, it’s important to recognize the opportunities for employment may not always be available.

Factors such as decline in health or unexpected life events can change a person’s employment capacity quickly.

Don’t take shortcuts

When catching up on retirement savings, shortcuts may be enticing. But it’s critical to employ strategies that align with your current life situation. As you get closer to your retirement date, be mindful of how much of your money is in market-based investments.

If the market takes a downturn, you’re not only losing money – you also have a shorter timespan for recovery and build-up toward retirement savings once again.

Portfolio diversification is key. Be sure your portfolio is suited to your age, needs, future goals, and other individual factors.

Need Help?

At SafeMoney.com, we recognize education is the first step toward any retirement planning. Use the articles we have on here for your educational betterment. And when you’re ready for personal guidance, meeting with a financial professional can help bring retirement peace of mind.

Use our Find a Licensed Advisor section to connect directly with an independent financial professional, and to request a personal strategy session to discuss your needs and goals. And should you have any questions or concerns, call 877.476.9723.

The post Ways to Catch Up on Retirement first appeared on SafeMoney.com.