Financial Advisers Offer Solutions for Retirement Concerns

Many individuals approaching retirement face significant financial concerns, primarily the fear of running out of money. According to a recent survey by Allianz Life, approximately 64% of Americans prioritize this worry over death itself. Despite these fears, only 23% of respondents reported discussing their financial concerns with a professional adviser. This disconnect highlights the need for better financial planning as individuals transition into retirement.

Understanding Retirement Expenses

Creating a realistic retirement budget is essential to ensure that expenses do not exceed income. A common guideline suggests planning for about 80% of pre-retirement income. This figure should encompass various sources of income, including Social Security, pensions, and withdrawals from retirement savings such as IRAs or 401(k) accounts. Additionally, income may be supplemented by assets like stocks or rental properties.

Some individuals may assume they can maintain their lifestyle on a lower percentage of their previous income. However, many find that their expenses in retirement can be equal to or greater than their working years. This is partly due to the fact that retired individuals have more free time to spend on activities such as travel, dining, and entertainment, which can quickly add up.

It is crucial to accurately assess both income and expenses. Key considerations include monthly bills, any remaining mortgage or credit card debt, and potential inflation impacts on purchasing power. For instance, the Genworth Cost of Care survey indicates that the average cost of nursing home care could reach $135,500 per year by 2026. Furthermore, research from the Health and Human Services Department reveals that over half of Americans turning 65 will require some form of long-term care.

Strategies for Financial Stability

If retirement planning reveals a potential shortfall between expected income and expenses, there are several strategies to consider. One option is to reassess the timing for claiming Social Security. While individuals can start receiving benefits as early as age 62, this choice results in a reduced monthly payment. Delaying benefits until full retirement age (typically 67) or even until age 70 can significantly increase the monthly payment amount.

Exploring additional income streams is another viable strategy. Purchasing an annuity can provide a guaranteed monthly payment for life, offering a sense of financial security similar to a pension. Alternatively, some may choose to postpone retirement entirely, allowing more time to save and reducing the number of years when they will draw from their savings.

Ultimately, there are numerous avenues for enhancing financial security in retirement. Consulting with a financial professional can provide tailored advice based on individual circumstances, enabling a more confident approach to planning for the future. With careful preparation, retirement can be a fulfilling chapter, free from the anxiety of financial instability.

This article was contributed by Ronnie Blair as part of Kiplinger‘s Adviser Intel program, a network of trusted financial professionals. The views expressed here do not necessarily reflect those of the Kiplinger editorial staff. Readers are encouraged to verify adviser credentials with the SEC or FINRA.