Know your risks, plan for well-being
Projecting how your retirement will unfold is not like connecting dots with a straight line. There are curves, unknowns and obstacles to navigate. By understanding the risks you face while planning for retirement, you can make smart choices in response to financial challenges and life events you couldn't have predicted, and feel more confident about the future.
Consider your risk factors
To help ensure that your planning process is comprehensive and broad, consider these risk factors.
Health care needs
Currently, a couple age 65 with median prescription drug expenses is predicted to need $270,000 for a 90% chance of covering future health care costs. By the time you are closer to retirement, that number is likely to have gone up with the trend toward rising health care costs.1
Many people are in a time of rising life expectancies and earlier retirements. Plan on saving more prior to retirement, and consider how longevity may affect your spending during retirement.
Even if inflation rates stay relatively low, they can deteriorate the buying power of your savings.
Pull too much from savings early in retirement and you increase the risk of outliving your money. Make sure you balance using your own resources against using Social Security benefits and other income sources.
Plan for well-being
Entering retirement is a major life event — exhilarating, exciting and emotional. To make sure you're headed toward the life you really want to live in retirement, think not just about replacing your paycheck but also about your well-being. Consider these four aspects of well-being.
Physical health: If you're in decent health late in your career and in retirement, you will be more likely to have the strength and attitude to do the things you want to do — like working, volunteering, traveling, spending time with friends and playing with your grandchildren.
Healthy behaviors: Eating sensibly, exercising and avoiding tobacco can help keep chronic medical conditions under control and could help you to keep your health care expenses manageable in retirement. Investing in yourself is as critical as investing in your retirement accounts.
Emotional health: Life changes and stress can negatively impact your emotional health and overall well-being. Financial confidence is important because money is many Americans' top worry, ranking higher than health, family and work. 2
Basic access: Do you have access to health services and public amenities? Do you feel secure, satisfied and happy with where you live? For many, feeling confident about the necessities in life is the key to contentment.
Don't focus solely on money when you're in the countdown to retirement
It’s important you have the right financial advice when preparing for retirement. Make sure to have regular meetings with your advisor to update your financial plan and track your progress toward your retirement goals.
1Employee Benefit Research institute, January 2019. Savings Medicare beneficiaries need for health expenses: some couples could need as much as $363,000
22019 BlackRock Global Investor Pulse survey