Many households think they are planning carefully for retirement. In many cases, they are not. Weak spots in their retirement planning and saving may go unnoticed.
Couples should recognize that they may face major medical expenses. Each year, Fidelity Investments estimates how much a pair of newly retired 65-year-olds will spend on health care throughout the rest of their lives. Fidelity says that on average, retiring men will need $133,000 to fund health care in retirement; retiring women, $147,000. Even baby boomers in outstanding health should accept the possibility that serious health conditions could increase their out-of-pocket hospital, prescription drug, and eldercare costs.1
Retirement savers will want to diversify their invested assets. An analysis from StreetAuthority, a financial research and publishing company, demonstrates how dramatic the shift has been for some investors. A hypothetical portfolio split evenly between equities and fixed-income investments at the end of February 2009 would have been weighted 74/26 in favor of equities exactly nine years later. If a bear market arrives, that lack of diversification could spell trouble. Another weak spot: some investors just fall in love with two or three companies. If they only buy shares in those companies, their retirement prospects will become tied up with the future of those firms, which could lead to problems.2
The usefulness of dollar cost averaging. Recurring, automatic monthly contributions to retirement accounts allow a pre-retiree to save consistently for them. Contrast that with pre-retirees who never arrange monthly salary deferrals into their retirement accounts; they hunt for investment money each month, and it becomes an item on their to-do list. Who knows whether it will be crossed off regularly or not?
Big debts can put a drag on a retirement saving strategy. Some financial professionals urge their clients to retire debt free or with as little debt as possible; others think carrying a mortgage in retirement can work out. This difference of opinion aside, the less debt a pre-retiree has, the more cash he or she can free up for investment or put into savings.
The biggest weakness is not having a plan at all. How many households save for retirement with a number in mind – the dollar figure their retirement fund needs to meet? How many approach their retirements with an idea of the income they will require? A conversation with a financial professional may help to clear up any ambiguities – and lead to a strategy that puts new focus into retirement planning.
At Smart Financial we help individuals and families create retirement plans and ask the right questions, so they can be prepared for any major risks in retirement. If you would like our office to review your current retirement plan and assess for weak spots give us a call and we would be happy to help.
Economic Update
April saw the S&P 500 advance 0.27% as a new earnings season unfolded – one in which investors grew uneasy about rising Treasury yields, protectionism, and privacy concerns involving tech giants. While the financial media largely focused on those anxieties, good news also appeared. The latest consumer spending and consumer confidence data was solid. Home buying picked up as listings increased slightly. Oil rallied, and so did the dollar. Overseas equity benchmarks saw big gains, even as some economists wondered if the boom in global growth was fading. One of the major financial news stories of April broke only hours before the start of May: a postponement of the tariffs planned for imported metals. 3
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – marketwatch.com/story/youre-probably-going-to-live-longer-what-if-you-cant-afford-it-2018-04-23 [4/23/18]
2 – nasdaq.com/article/how-to-prepare-your-income-portfolio-for-volatility-cm939499 [3/26/18]
3 – quotes.wsj.com/index/SPX [4/30/18]
Investment advisory services offered through Capital Asset Advisory Services, LLC., a registered investment advisor. Not associated with or endorsed by the Social Security Administration or any other government agency. Smart Financial does not offer legal or tax advice. Please consult the appropriate professional regarding our individual circumstance.