There is a simple and unsettling reality in the United States. Most Americans are not financially prepared for retirement.
Some are completely unprepared. The Employee Benefits Research Institute (EBRI)’s 2020 Retirement Confidence Survey found almost half (41 percent) of workers have less than $50,000 in personal savings and investments, and about 18 percent has less than $1,000.1
Many are better prepared. Slightly more than half of survey participants were actively saving for retirement. However, not many had taken other steps to prepare such as:1
It is relatively unsurprising to learn people who are most confident about retiring have spoken with a professional financial advisor about retirement planning.1
While working with financial advisors may improve retirement outcomes, saving is critical for anyone who wants to retire from working full-time. In fact, the majority of workers and retirees participating in a recent Wells Fargo survey wish they had begun saving for retirement sooner than they did.2
Factoring in the healthcare variable
No matter when individuals begin to save or how much they’re setting aside, even sound retirement plans can be disrupted by rising debt, healthcare costs and catastrophic illness. According to the EBRI 2020 report, roughly half of all workers say debt has had a detrimental impact on their ability to save more for retirement. There is also evidence Americans are concerned about healthcare issues, as respondents to the EBRI study rated Health care as the second most critical issue facing America today behind the economy. However, many have not accurately factored health care expenses into their own retirement plans.
According to a recent Wells Fargo survey, “Nearly half of workers (45 percent) have not actively considered health care expenses for retirement planning, and even among workers age 60+ nearly a quarter (23 percent) have failed to take healthcare expenses into account.”2
It’s daunting to consider health expenses have increased faster than inflation in recent years. In addition, patients are being asked to pay a larger share of the expense. From 2016 through 2025, health care spending was expected to grow by 5.6 percent a year, on average.3
Retirees can feel the effects of higher healthcare costs more than younger Americans do. A 2019 Fidelity Investment’s study, Retiree Health Care Cost Estimate, show that a retiring couple last year would need to have about $280,000 to cover the costs of health care in an average retirement. 4
Moving toward a comfortable retirement
If thinking about retirement makes you a bit queasy, it’s likely you haven’t prepared as well as you should. The good news is developing and implementing a retirement plan is fairly straightforward. Here are a few steps that can help boost retirement confidence:
Will you be able to retire comfortably? It’s a complicated question. The answer can be equally complicated. If you would like help figuring it out, or want to review your current plan, get started by clicking the button below.
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Securities offered through “LPL Financial”, Member FINRA/SIPC.
This material was prepared by Carson Coaching. Carson Coaching is not affiliated with the named broker/dealer or firm.
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