Tahoe-Truckee Market Beat: Retirement planning considerations
Planning for retirement can be a difficult task. Many employees today aren’t covered by pensions, so they have to manage their own retirement funds via their employer sponsored plan like a 401k or a 403b.
If you’re among the ranks of the self-employed you’ll need to set up and fund your own retirement plan. There are many excellent choices available for small business owners who want to establish a retirement plan such as a 401k — an owner only 401k; an SEP, which is a Simplified Employee Pension; or a SIMPLE, which stands for Savings Incentive Match Plan.
One important consideration when retirement planning is life expectancy. Life expectancy in the United States has been increasing until the last year or so when it has leveled off somewhat.
According to the Social Security Administration, a man reaching age 65 today should expect to live another 19.3 years on average and a female turning 65 today will live another 21.6 years on average.
So, when planning ahead for retirement, you should overestimate to be on the safe side and be prepared to live into your nineties. Since most women live longer than men and have a tendency to marry older partners in traditional marriages, females should plan on living in widowhood for a few years.
Verify your social security benefits and determine what age is best for you to start collecting that social security check. Your benefit amount will increase if you delay starting social security payments.
If you’re in your pre-retirement years, fund your retirement account as early as possible and save as much as you can. If you have an employer sponsored plan and they offer a matched contribution, you should save enough at a minimum to get the maximum matching contribution. Not taking advantage of the maximum employer match is a common mistake that you don’t want to make.
Another error that is fairly common is underestimating health care costs in retirement. Health care can be very expensive even if you’re already eligible for Medicare. You probably will want to consider purchasing a Medicare supplement.
Average out of pocket health care costs in retirement are over $250,000 and that number does not include long-term care and nursing home costs.
Battles with diseases like cancer, diabetes and heart disease are very common for older Americans and can be quite expensive. Forms of dementia, including Alzheimer’s can cost more to fight than cancer.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.