Americans are fairly worried about what life will look like
throughout their retirement.
This is unfortunate, since your later years should be a time
to enjoy the fruits of a lifetime of labor. Still, the fears that most people
share are often well-founded, even if there are ways to overcome them.
A recent Goldman Sachs survey revealed the three top
concerns shared by many older people across the U.S. Here's what they are.
1. Healthcare costs
According to Goldman Sachs, 44% of retirees indicated they
had concerns about future healthcare needs. This is unsurprising, given the
whopping cost of medical care late in life. One recent Fidelity survey found a
senior couple could expect to spend around $300,000 out of pocket throughout
their retirement on medical services, beyond what Medicare pays for.
Preparing for such a large expense should ideally start
early, and current workers who are eligible for a health savings account (HSA)
should strongly consider saving in it for their future care needs. HSAs offer
the opportunity for tax-deductible contributions, tax-free growth, and tax-free
withdrawals as long as the money is used for qualifying medical expenses.
For seniors already in retirement without a hefty HSA
balance or other money earmarked for medical care, finding the right Medicare
coverage will be absolutely essential to help keep costs down.
2. A possible Social Security benefits reduction
Worries about Social Security came in a close second to
concern about retirement costs. A total of 43% of retirees reported they were
afraid their monthly benefit would fall in the future.
It's also understandable that many people would have these
fears, especially given that the most recent Social Security Trustees Report
indicated the program's trust fund could run dry by 2034. While that wouldn't
end benefits, as money from current workers would still come in, it could
result in an automatic 22% reduction.
The good news, though, is the political reality suggests
lawmakers will step in to prevent retirees from losing a good chunk of their
income. Social Security is a popular program, and past attempts to reform it
have either failed or been phased in over decades so no current seniors or
people close to retirement were affected.
3. The consequences of inflation
Finally, inflation was also a big issue for retirees, with
42% reporting to Goldman Sachs they were worried about the effects of rising
prices on the remainder of their retirement. This concern is especially
justified given the current soaring inflation across the U.S.
Inflation can reduce the buying power of Social Security
benefits despite cost of living adjustments (COLAs), as they haven't proved to
keep pace with inflation. And it can diminish the spending power of your
savings as well.
The best way to be prepared for high inflation is to invest
wisely so your money grows faster than prices increase; to have more saved than
you think you'll need so you can increase your spending if prices rise more
than expected; and to try to maximize Social Security income, which at least
provides some protection against inflation even if COLAs have been too small.
For current retirees, making budget cuts may be essential,
as it's too late to increase savings substantially or to change a Social
Security strategy. This can mean taking advantage of senior discounts, using
substitute products when certain items become very expensive, or even moving to
an area with a lower cost of living if inflation is persistent and severe and
you worry about running short of funds.
By planning ahead for these three worries, future retirees
can enjoy their senior years with fewer concerns. And those who have already
left the workforce can ensure they remain as comfortable as possible for the
rest of their lives.
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