In this article, the topic and key issues are the unique challenges of an era that have disrupted traditional retirement strategies that future retirees face.
People are living (and retiring) longer.
In the 21st century, the average life expectancy for today’s 65 year old has increased to nearly 83 years old!. This is according to mortality statistics. And people are living for much longer than they used to. Most causes are obvious with better health care and preventative medicine people usually live for more than a few years after they retired. That means Social Security have to make payments to people for years and years. And yes, nobody could have guessed back then that people today would be receiving Social Security payments for 20 years… or longer!
Medical advances of preventive medicine during later years allow people to treat their health better. Inevitably, these trends lead to the fact that the average retirement age is going down and at an earlier age people can start receiving Social Security payments.
This is good news… right? we are treating our bodies with greater respect in our middle age. We are living longer and retiring younger! The bad news … is that Social Security is set to run dry in 2035…
The new way of life is we want to live longer but more prosperous. More importantly we simply cannot rely on Social Security to last until 2035 or beyond and then be relegated to a lifetime of hard work because we didn’t plan ahead properly.
This means in this late adulthood, we MUST depend on ourselves for a career shift, part time or flexible time work if we want to continue our twilight years in comfort and happiness!
Purchasing Power Weakens Over Time, susceptible to inflation.
Even after you retire, expenses remain a factor over the income. Gone are the days where houses, cars and food were cheap and plentiful. Yes, salaries were lower back then as well, but the point is, things nearly always cost less in the past but not in future with the current rate of erosive effects of inflation. This invisible factor wreaks havoc on savings and retirement funds. Unfortunately, our savings and overall financial investments may not keep pace with the growing costs of goods and services.
Even if you return to work or start a business, your taxes still remain a factor and your tax bracket could change. You may have to move to another state or even a different country if taxes could affect your bottom line. Inflation follows you and you may lose a bite out of your savings if its effects corrode your savings full force. Your purchase power is not nearly as much as in the last 30 years worth. Even if your savings sit for 30 years, you would have lost as much as 60% of its value if you did not plan for inflation or investment in your retirement.
So how and what can you fight inflation with?
You can consider low risks fixed-income or money market investments in your investment portfolio. Over a term to keep pace with inflation, you need to maintain growth-oriented investments. Financial institutions generally recommend stocks, bonds and mutual funds with superior returns although some involve short-term volatility. Financial advisors should be educating retirees on this vital retirement tool.
How to slash Lifetime Taxes?
Effective tools that offer to meet your retirement goals which have potential tax advantages are in annuities and tax free mutual funds. These deferral taxes help your retirement savings grow.
Most retirees completely misunderstood this new retirement tool and it took a long time for it to gain any traction – even today, it is vastly underutilized. Granted an investment in a money market fund is not guaranteed, the fund seeks to preserve the value of your investment. You should still consult your tax advisors before making these financial decisions.
Although we cannot guess the rate or what taxes will be like in the future we cannot imagine paying taxes year upon year after retirement, maybe for the next 20 odd years. Again on average, you would not spend that much in retirement in the past, and thus didn’t have to plan on paying taxes year after year, still your purchasing power is going to reduce drastically.
Hopefully more financial consultants in their professional fields will change their stretegies and encourage people to employ lifetime tax planning strategies as part of their retirement income plans. The plan to pay taxes now on your retirement funds is largely a great plan, rather than the traditionally defined contributions down the long retirement road.
Advancing Technology in the new century
Given the recent Covid pandemic which has forced the workforce to adapt to rapidly changing workplace environments. Working from home using high technology are being taken advantage of. Working remotely can hold meetings, give presentations, and maintain digital face-to-face conversations with friends, family, and colleagues alike. You can seek assistance with a financial advisor to develop appropriate strategies from home. This can prove to be a boon for those seeking financial advisors globally!
Now, the financial professional that might suit you best to project your periods of retirement could live anywhere. It’s extremely simple to discuss your financial situation with them working to suit your time available. At this stage, you are likely to find the best advisor for YOU maybe even in your hometown. Perhaps it’s the right time, NOW!?
In Conclusion
These are the game changing challenges for people who are living longer and retiring younger. There’s no let down but inflation is high and prices are rising. Would we rather die or figure out how to plan for it?
In spite of these challenges, there’s plenty of research on many robust, efficient products and helpful services at our disposal with a greater range of tax-advantaged investments. There is a wide array of cutting-edge technologies that empower us to find the most suitable financial advisors, no matter where they are. These resources are practically at our fingertips because of the internet. These are indeed exciting times too!