Longer Life Expectancy Translate to Retirement Income Shortfalls

A changing economy has record numbers of retirees heading into their golden years without a dependable income source, much less a plan to cover future medical needs.

Most people realize that, sooner or later, they will need to plan for retirement. As baby boomers stream into retirement at a rate of 10,000 per day, a majority of them do so with no retirement plan in hand.

Unlike their parents and grandparents, this generation of aging Americans is redefining retirement, in many instances without the benefit of a pension, IRA or a 401(k). In addition, many baby boomers harbor misconceptions about retirement planning, a phenomenon that has launched a growing movement among financial planners to help the under-prepared find a way to retire securely in 2015 and beyond.

According to registered investment advisor Gregory Ricks, Founder and CEO of Gregory Ricks & Associates, Inc. in Metairie, LA, the most pressing matter is longevity. A recent Society of Actuaries study found that couples turning 65 this year have at least a 50 percent chance of one spouse living to age 92, and a 25 percent chance of the other spouse living to 97. For single 65-year-olds, the study also found that half of all men and women are likely to live to 85 and 88, respectively.

While everyone’s average life expectancy is increasing, too few retirees have given enough thought to what these added years mean to their long-term health care costs.

Baby boomers at the younger end of the generational spectrum still believe their good health will last forever, and many of those who have actually saved for retirement have neglected to make financial plans for long-term health care costs. However, the statistics should be a wake-up call to everyone born between 1946 and 1964.

According to a study from LongTermCare.gov, today’s 65-year-olds have a nearly 70 percent chance of requiring some form of long-term care in their future; women will need, on average, 3.7 years of long-term care, and men are looking at 2.2 years. Much of that care will not be covered by Medicare, Medicaid or HMOs. These figures translate to about $75,000 per year in out-of-pocket costs; 20 years from now it could be as much as $185,000, according to the study.

Such an expense can drain a retiree’s savings if they haven’t planned ahead by incorporating a long-term care insurance policy into their retirement plan. Surprisingly, the real problem with most retirees and pre-retirees is getting them to understand the need.

“As an advisor, I like to jump on these misunderstandings and potential missteps, and educate my clients, show them how to establish a sound retirement plan that provides security, consistency and predictability,” Ricks says. “By addressing these issues early on, an experienced advisor should be able to guide clients into retirement with as much security at as little risk as possible.”

In addition, many boomers aim to retire at least a few years early, and yet a substantial number of them do not understand that Medicare isn’t available to them until age 65. Anyone retiring before they turn 65 will need to have a hefty savings account, enough to pay for health insurance purchased either privately or through the new healthcare exchange.

Today’s aging community didn’t spend a lifetime choosing to ignore planning for retirement; in most cases, day-to-day life took precedence. Raising a family, putting children through college in today’s economy will push retirement planning to the back burner, even for people with means. Too many parents prioritize paying for private university educations at the expense of saving for retirement, sometimes with the idea that their children will take care of them after retirement.

Delaying contributions to a well thought-out retirement plan comes with serious consequences that often aren’t realized until it’s too late.

Contact Info:
Name: Gregory Ricks
Email: Send Email
Organization: Gregory Ricks & Associates
Phone: (504) 832-9200
Website: http://www.gregoryricks.com

Source URL: http://councilofeliteadvisors.com/liftmedia

Release ID: 81254