Science says we’re all living longer, which is great news. But when it comes to retirement, the prospect of having 20 years to play with is impacting how seniors approach life after work. Here are the three effects a long life can have on retirement:
Seniors Will Pay More for Health Care
The overall cost of health care and long-term care during retirement will likely increase thanks to longer lifespans. A 65-year-old couple retiring in 2018 will need $280,000 to cover health and medical care in retirement, according to Fidelity. Given those numbers, it’s critical that you have a plan. Start by making sure your retirement savings account for health care. You should consider starting a health savings account (HAS) to offset costs. Medicare does not cover out-of-pocket expenses like home health care, assisted living or a nursing home, so you should also look at purchasing insurance for long-term care. It won’t be cheap because many insurance companies have begun to raise their rates due to increased longevity, but it will offer you protection and peace of mind should you require expensive care down the road.
Seniors May Need Rethink Money Withdrawals
A long retirement seems like a dream on paper. More time to relax, travel, enjoy hobbies and spend time with family and friends. But a longer retirement also means you’ll need a lot more money than you might anticipate. In general, pulling out 4 percent of your retirement funds each year is practiced, safe and measured amount to spend. But that rule was created when people had shorter life expectancies. It may not work if you live 20 years beyond retirement age. So, it’s a good idea to rethink how much money you plan to take from your retirement funds each year. If you need help, talk to a financial consultant about the best ways to withdraw money in your golden years.
Seniors May Need to Work Longer
The prospect of a 20-year retirement means retirees will need more money to stay comfortable. Many seniors today continue to work well past the traditional retirement age of 65, or they work part-time after retirement. Staying employed allows seniors to feel more productive and active, and helps them grow their nest eggs. But experts say you shouldn’t wait too long to give up your job. If you have plans to travel you’ll want to do that when you’re healthy. Prolonging retirement vacation dreams means taking a chance that your body won’t be up for the trips. Keeping a job longer may also affect your health care coverage. If you’re 65 and don’t enroll in Medicare, there may be financial penalties for enrolling later. The penalty amount could go up 10% for every 12-month period after you were eligible.