ENVISIONING YOUR RETIREMENT Preparing Now for Your Ideal Future
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FOREWORD Thank you for your time and interest. This booklet was created as an educational guide with the intent to bring you greater clarity and understanding of the financial decisions you make. If you need more information on a subject discussed, we welcome your email and will attempt to get you the answers you need. Please be mindful as you read this; everyone’s financial situation is different. So any product or solution must match your specific financial picture. We strongly recommend you consult with a highly-rated professional about every financial decision you make. Because, just as not all products are created equal, neither are all financial professionals, and the difference in knowledge and advice can be substantial from one advisor to another. Working with a highly knowledgeable, independent, well-rated professional can make all the difference when it comes to the results you achieve. If you are ready to explore your retirement options and want some help cutting through the clutter and jargon, visit www.CertifiedSafeMoney.com for unbiased information and to connect with professionals who can answer all of your most pressing questions. If you ever have feedback related to this booklet or concerns about your retirement income and financial security, please email us at [email protected] We’re happy to help. CSM202101ENVRETIREMENT 3 [email protected] www.certifiedsafemoney.com
When you’re envisioning your retirement, what exactly do you see? Are you relaxing on a warm sunny beach, playing 18 holes of golf every day, or traveling to different destinations around the globe? While everyone’s idea of the perfect retirement can differ, one thing is the same – the best retirement plans start with preparing now for your ideal future, making it much more likely to turn that dream into a reality. DESIGNING YOUR RETIREMENT LIFESTYLE Although retirement has traditionally been viewed as the end of your working career, with longer life expectancy today, it is not uncommon for people to spend 20, 30, or even more years in retirement. So, in many ways, retirement could represent the beginning of a new adventure. But to fulfill the retirement lifestyle that you hope for, it is necessary to have a good solid plan in place. When creating your retirement “blueprint,” then, there are some critical factors to consider, such as: - When do you want to retire? - Where do you plan to live in retirement? - What type(s) of activities do you want to participate in? - How much do you anticipate spending for healthcare and/or long-term care needs? Search Enter the zip code CONTACTING A HIGHLY RATED PROFESSIONAL CSM202101ENVRETIREMENT 4 [email protected] www.certifiedsafemoney.com
When you plan to retire, and the type of retirement planning services you use can be two key components of your overall retirement planning strategy. That’s because the amount of time you have available to save and invest is crucial. For instance, if your goal is to leave the workplace within the next few years, your strategy will differ significantly from if you intend to work for another decade or more. According to U.S. News, in 2019, the average age that working Americans expected to retire was 66. This is up from age 63 back in 2002. But it is important to note that the age people plan to retire is not always the same as the age they do. For example, a Gallop poll found that the average retirement age in the United States since 2011 has been 61. This earlier-thananticipated retirement age stems from various factors, including being laid off or having an adverse health condition. With that in mind, it is essential to factor in a financial “cushion” just in case you end up retiring earlier than you had initially planned. Another consideration related to your retirement’s timing is when you plan to file for your Social Security benefits. Qualified recipients can file for benefits as early as age 62, but taking Social Security “early” can result in a permanently reduced dollar amount. For those who live a long life, these “lost” benefits can add up. Alternatively, you could wait until your full retirement age, or FRA, to start taking your Social Security benefits. Full retirement age can be between age 65 and age 67, depending on your birth year. Year of Birth Minimum Retirement Age for Full Social Security Benefits 1937 or Before 65 1938 65 + 2 months 1939 65 + 4 months 1940 65 + 6 months 1941 65 + 8 months 1942 65 + 10 months 1943 to 1954 66 1955 66 + 2 months 1956 66 + 4 months 1957 66 + 6 months 1958 66 + 8 months 1959 66 + 10 months 1960 or Later 67 Social Security Full Retirement Age Source: Social Security Administration WHEN DO YOU WANT TO RETIRE? CSM202101ENVRETIREMENT 5 [email protected] www.certifiedsafemoney.com
You also have the option of delaying your Social Security benefits until beyond your full retirement age. If you opt to do this, you will be eligible for a higher dollar amount of benefit – and this increased income will remain in effect for the rest of your life. In fact, the longer you wait to start receiving your Social Security retirement benefit, the more “delayed retirement credits” you will receive until you reach age 70. Each year that you wait to file can result in an additional Although many people rely on Social Security in retirement, it is important to have other income sources available to you. That’s because, according to the Social Security Administration, “if you have average earnings, your Social Security retirement benefits will replace only about 40 percent. The percentage is lower for people in the upper-income brackets.” It is also essential to decide whether or not you plan to work during retirement. In some cases, retirees enjoy the social (and financial) aspect of taking on a part-time job or even starting a new business after they have bid their employer goodbye. If you take benefits at age: Monthly benefit amount: 66 (Full Retirement Age) $2,000 67 $2,160 68 $2,320 69 $2,480 70 $2,640 8% income. (You can continue to delay your Social Security income receipt beyond age 70, but you won’t receive any additional delayed retirement credits after that time). As an example, if your full retirement age is 66, and your full amount of Social Security retirement income is to be $2,000 per month, you could end up with a 32% “raise” by waiting until age 70 to start collecting – and this does not even include any annual cost-of-living adjustments you may receive. CSM202101ENVRETIREMENT 6 [email protected] www.certifiedsafemoney.com
Where you plan to live in retirement can have a substantial impact on your expenses – and in turn, whether or not your retirement income will be enough. With that in mind, comparing the cost of living in various areas can be key in whether to remain in your current location or move elsewhere. Other considerations will typically include: - Proximity to friends and family - Taxes (for instance, does the area have state and/or personal property taxes, as well as sales tax on essential items like food and clothing) - Activities and amenities for retirees - Availability and cost of current and potential future healthcare services WHERE DO YOU PLAN TO LIVE IN RETIREMENT? CONTACT A PROFESSIONAL CSM202101ENVRETIREMENT 7 [email protected] www.certifiedsafemoney.com
WHAT TYPE(S) OF ACTIVITIES DO YOU WANT TO PARTICIPATE IN? The activities you plan to take part in during retirement can also play a role in your overall retirement plan. For instance, if you are hoping to travel to faraway places, you will need to factor in the price of transportation, lodging, and other related expenses. On the other hand, if you plan to stay close to home and take advantage of free or inexpensive outings like walking in the park and visiting attractions like museums and zoos, your expenses could be more modest. In any case, though, it will be necessary to factor in your day-to-day living costs, such as: - Housing - Utilities - Transportation - Food - Clothing and other personal items - Healthcare / prescription medication - Insurance - Taxes Also, your retirement time may not be filled with the same activities – or expenses. For instance, during the early years of retirement, people tend to be more active, and in turn, may require more funds to take part in these activities. However, as people age, they will typically slow down and become less active. This, however, may or may not necessarily mean that your expenses will be reduced, though. That is because healthcare and/or longterm care needs could require a substantial amount of out-of-pocket costs. CSM202101ENVRETIREMENT 8 [email protected] www.certifiedsafemoney.com
HOW MUCH DO YOU ANTICIPATE SPENDING FOR HEALTHCARE AND/OR LONG-TERM CARE NEEDS? Healthcare can encompass a significant portion of your overall retirement expenses. According to a recent Fidelity research paper, a 65-year-old couple who retired in 2019 can anticipate spending approximately $285,000 in out-of-pocket healthcare costs – and this does not include the price of a long-term care need. Even if Medicare covers you, this program has a long list of expenses you could be responsible for, such as copayments, While most people don’t like to think about it, the likelihood of needing long-term care increases as we age. According to U.S. government statistics, someone turning age 65 today has almost a 70% chance of needing at least some type of longterm care services and support in their remaining years. This type of care can be quite expensive, too. According to Genworth’s 2019 Cost of Care Survey, the average monthly cost of care can range from $1,625 to $8,517, depending on location and the type of care required. coinsurance, and deductibles. In addition, many retirees are surprised to find that Medicare pays little (or no) benefits for various needs, like skilled nursing facility care or home health care. For instance, even if you qualify for a Medicare-covered stay in a skilled nursing home, your out-of-pocket expenses could be more than $14,000 (in 2020) – and that’s just for the first three-and-a-half months. Days: You pay (for each benefit period): 1 – 20 $0 21 – 100 $176 coinsurance per day 101 and beyond All costs Medicare Part A Skilled Nursing Facility Costs Source: Medicare.gov CSM202101ENVRETIREMENT 9 [email protected] www.certifiedsafemoney.com
Nursing Home Facility Private Room: $8,517 Semi-Private Room: $7,513 In-Home Care Homemaker Services: $4,290 Home Health Aide: $4,385 Community and Assisted Living Adult Day Health Care: $1,625 Assisted Living Facility: $4,051 Source: Genworth Cost of Care Survey WILL YOUR RETIREMENT INCOME LAST AS LONG AS YOU NEED IT TO? The longer people live, the more at risk they are for incurring healthcare (and other) related expenses. Even though many positives go along with living a nice long life, longevity is often deemed the “multiplier” of all other financial risks – such as market volatility, low interest, rates, inflation, and healthcare expenses. That is because you’ll have to face these risks for a longer period of time. Although retirees several decades ago did not typically have to worry about stretching out their income for many years, this is not the case today. In fact, according to data from the Social Security Administration: - A man who turned age 65 on April 1, 2020 can expect to live, on average, until age 84 - A woman who turned age 65 on April 1, 2020 can expect to live, on average, until age 86.5 But these are just averages, though, because about one out of every three 65-year-olds today will live to at least age 90 – and about one out of seven will live to at least age 95! Will your retirement income last that long? CSM202101ENVRETIREMENT 10 [email protected] www.certifiedsafemoney.com
PUTTING A RETIREMENT SAVINGS STRATEGY IN PLACE Getting started with a retirement savings strategy is essential for securing a successful retirement – and the earlier you begin, the better. That’s because the power of compounding can allow your money to grow substantially throughout the years. It can be beneficial to run a retirement needs analysis to determine approximately how much you need to save in order to live your desired retirement lifestyle. The key components of a retirement needs analysis include: - Income needs - Expense requirements - Inflation rate - Return on investments - Taxes - Number of years before retirement - Life expectancy One of the big keys to saving for retirement has to do with the way taxes are handled. For example, with traditional IRAs and employer-sponsored retirement plans like 401(k)s, your money can grow tax-deferred. This means that there is no tax due on the gain until the time of withdrawal. Over time, then, these accounts can grow and compound exponentially because your money is generating a return on the contribution, as well as on the previous interest, and on the funds that would otherwise have been paid out in taxes. STARTED SAVING AT AGE 25 STARTED SAVING AT AGE 40 CSM202101ENVRETIREMENT 11 [email protected] www.certifiedsafemoney.com
In addition, these plans can provide other tax-related benefits as well. For instance, if you can contribute money on a pre-tax basis, you will pay less in income taxes in the years that you make your contributions. That’s because the amount of your contribution is deducted from your annual taxable income. You may also have the option to contribute to a Roth IRA and/or a Roth retirement account. With Roth accounts, money is contributed on an after-tax basis. However, the funds grow tax-free, and withdrawals are also made free from income tax after the five-year waiting period. Therefore, no matter what the then-current income tax rates are in the future, you can use 100% of your Roth withdrawals. There are some other differences, too, between traditional and Roth accounts. For example, traditional IRAs and retirement plans require that you begin making withdrawals at age 72. This is not the case with a Roth. Yet, while the Roth IRA has fewer restrictions regarding withdrawals than traditional plans, there are income limits regarding who is eligible to participate in a Roth IRA. WORKING TOWARDS THE RETIREMENT OF YOUR DREAMS Building the retirement of your dreams can take some work, as well as a great deal of discipline when it comes to sticking with a savings and investment plan. It can also require overcoming various risks and being mindful of the impact of taxation. But it can be well worth it. If you’d like to set up a time to talk with a retirement planning specialist who can help you get a plan in place – or, if you already have a plan but would like to determine whether or not you are still on track – feel free to send us a message through our secure online contact form or sending us an email at [email protected] We look forward to hearing from you. Traditional IRA Roth IRA Tax-deductible contributions Yes No Annual income limits for participation No Yes Required minimum distributions Yes No Taxation of withdrawals Yes No Traditional versus Roth IRA CSM202101ENVRETIREMENT 12 [email protected] www.certifiedsafemoney.com
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