Once upon a time, retirement was a lot simpler than it is today. People lived off of social security benefits, personal savings, and a pension from their employer. But today, the retirement landscape is much more complex, and uncertain. As Certified Public Accountants, we wanted to explain why now, more than ever, it’s imperative to proactively plan for your retirement goals.
Social Security May Sink
As a population, we’re living longer and healthier lives. While that’s good news, it’s also putting a huge strain on the social security system. Basically, the number of social security recipients continues to grow at a much faster rate than workers who are paying into the system. It’s projected that the costs associated with running the social security system will exceed its total income by 2020, which is largely due to the aging population. Plans are in place to mitigate these losses, but it’s possible that many of us will see a major reduction, if not a total collapse, of social security benefits in our lifetime.
Pensions are Less Popular
You may be among the lucky few who still work for a company that offers a pension. Once thought to be the cornerstone of retirement income, we now know that corporate bankruptcies will wipe out your pension in the blink of an eye. Remember the Enron and Lehman Brothers debacles? Those were just two of the nearly dozen major corporate bankruptcies since the turn of the century.
Nowadays, employers would much rather offer a defined-contribution plan, like the ever-popular 401(k), which shifts liability and expenses away from the employer, and puts the burden of planning for a secure retirement directly onto the employee.
Medical Expenses May Loom
Old age typically brings medical problems and increased healthcare expenses. Even if you do receive social security benefits, those funds won’t be nearly enough to cover medical costs. You’ll need your own nest egg to help cover medicals expenses while also allowing you to live the lifestyle you want.
Granted, trying to figure out how much you’ll need for medical care at age 75 when you’re 45 is a challenge. To prevent any unforeseen illness from wiping out your retirement savings, you may want to consider getting long-term care insurance. Also, if you have a life insurance policy, you may be able to access the death benefit in the event of illness. Talk to your life insurance agent for details.
Estate Planning is Essential
Part of retirement savings also includes thinking about the financial legacy you want to leave to your family through estate planning. You may think that estate planning is only for the ultra-wealthy, but that’s a common misconception. Many people plan to use part of their retirement savings to help contribute to their children’s or grandchildren’s lives. For example, you may want to help fund your grandchild’s college education, pay for a dream wedding, or give them a financial head start in life.
Without a well-planned retirement nest egg, you may be forced to liquidate your assets in order to cover your expenses during your retirement years. This could prevent you from leaving a financial legacy for your loved ones, or worse, cause you to become a financial burden on your family in your old age.
Retirement Planning is an Imperative
Many people avoid retirement planning altogether because it can be overwhelming. However, ignoring it and hoping everything “works out” is simply not an option.
Fortunately, you don’t have to plan for your retirement alone. Contact the financial experts at Tobin & Collins. For more than 50 years, Tobin & Collins has provided financial services to clients in the New Jersey and New York metropolitan area. Our exceptional team of professionals provides personal service and sound financial strategies that puts our clients on the path to future success.