The need for retirement planning

Throughout the 20th century, retirement in America was usually defined in fairly simple terms and was directly related to an individuals active participation in the work force. After reaching a certain age, most retirees would leave the work force and begin the next phase of their life – retirement. Not much was expected during this time, as declining health often made retirement short and unpleasant. With shorter life expectancies, retirement planning was less of a priority and typically focused on having enough funds for a relatively short period of time.

As we moved into the 21st century, most Americans started realizing that this traditional view of retirement is no longer realistic. Ideas of retirement now come in a variety of forms. Some choose to retire early, while others remain in the work force well into 70s. More often than not, retirement is now seen as less of a time to relax, and more of a time to pursue “bucket list” activities. Traveling, returning to school, volunteer work, or pursuing favorite hobbies are now the dreams for several retirees.

Regardless of the changes, the cold hard realities of retirement still exist. Outliving your money and poor health are still challenges that retirees must consider. With proper planning, however, Americans can live the retirement lifestyle of their dreams.

With people living longer, life expectancy has created the biggest change in retirement planning. In 1900, a child had an average life expectancy of about 47 years. In 2011, however, this number drastically increased to about 79 years.

Planning for a significantly longer retirement isn’t easy. Future retirees now have new problems to address that earlier generations never had to consider. In order to create a comprehensive plan a retirement, some key issues need to be addressed now, while working, so there is time to prepare accordingly.

Paying for retirement: Providing a steady income is often the key problem involved in retirement planning. Longer life spans raise the issue of the impact of inflation on fixed dollar payments, as well as the possibility of outliving retirement funds. Social Security retirement benefits and income from employer-sponsored retirement plans usually only provide a fraction of the total income required. If income is not ample, a retiree may be forced to either continue working, or face a more modest retirement lifestyle.

Health care: The health benefits provided through the federal government’s Medicare program are usually considered to be only a foundation. A supplemental Medigap policy is often needed. A long-term care policy, to provide needed benefits not available through Medicare has also become a retirement standard. Health care planning should also include a health care proxy, which allows someone else to make medical decisions when an individual is temporarily incapacitated. A living will that expresses an individual’s wishes when no hope of recovery is possible is also a good idea.

Estate planning: Retirement planning should eventually consider what happens to an individual’s assets after retirement is over. Estate planning should ensure that assets are transferred to the desired individuals or organizations and that the transfer is done with the least amount of tax.

Housing: This topic involves not only the size and type of home but also its location. Factors like climate, proximity to family members, and medical care are important to consider during retirement planning. Completely paying off a home loan can reduce monthly income needs. A reverse mortgage may provide additional monthly income.

Lifestyle: Some retirees that are use to to a busier lifestyle find it difficult to enjoy the freedom offered by retirement. Planning ahead on how you will spend your time can make this transition easier.

Developing a successful retirement plan means carefully considering a wide range of issues and potential problems. Finding solutions to these questions usually requires both personal education and the guidance of knowledgeable individuals, from many professional disciplines. The key is to begin planning as early as possible.

This information is for educational purposes and should not be considered specific financial, tax or legal advice. Always consult with a qualified advisor regarding your individual circumstances. Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Adviser.

Brad Zucker, RFC® is the president of Safe Money Advisors, Inc., a Las Vegas-based independent financial advisory firm. He blogs on personal finance every Monday for the RJ. For more information visit or connect with him viaFacebookandLinkedIn.

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