Monday, 1 March 2021

The average life expectancy for a 65-year-old man and a 65-year-old woman are 19.3 years and 21.6 years, respectively, according to the Social Security Administration.

With such a long retirement to look forward to, it's no wonder that financial experts recommend that you start saving for retirement as early as possible. The last thing you want is to have to take a huge pay cut because you didn't prepare properly. Here are some tips and questions to ask yourself to ensure you are on the right path:

1. What are your retirement goals?

A general rule of thumb is that you need to save 80 percent of your pre-retirement income. But depending on your current financial situation and personal goals, maintaining your lifestyle after retirement may require more or less than that amount.

Do you have a comprehensive retirement income plan that takes into account all of your assets and revenue streams including pensions, home equity, Social Security, etc? Knowing where your income will come from when you retire is key to setting realistic goals.

2. Are your retirement goals realistic?

If you set your retirement lifestyle expectations too high, your goal could be unattainable, leaving you feeling discouraged. Do you expect to retire at 65? Does that work with your retirement income plan? You may have to adjust your timeline to build the nest egg you want. Ask yourself if your goals are realistic. You'll want to challenge yourself, but don't put yourself in a position where you simply can't make it work.

3. Be flexible

When you still have more than 10 years before retirement, it's hard to know what kind of lifestyle you'll have right before you leave the workforce. It's still wise to make an educated decision on what you want your retirement lifestyle to look like, but be willing to change your assumptions as you get closer.

4. Don't go it alone

If you're trying to do all of your retirement planning by yourself, you might sell yourself and your retirement lifestyle short. Unless you're a subject-matter expert, there may be some retirement considerations that you don't know about.

Working with a financial planner can help you get a fresh set of eyes and an objective perspective on your retirement strategy. You can find out whether your goals are reasonable and also get the right advice on how to reach them.

5. Take the right amount of risk

When you're young, having an aggressive portfolio might be a good option because you have time to weather market downturns. But as you draw nearer to retirement, you want to protect the wealth you've accumulated. As a result, you might want to take less risk the older you get to avoid taking a hit that you can't recover from. Talk with a trusted investment and financial planning advisor about how much risk you need in your portfolio to allow for growth without too much exposure.

6. Don't forget about health care and long-term care costs

One of the most overlooked expenses in retirement is health care. According to Fidelity, a 65-year-old couple in good health retiring in 2016 with Medicare would have still needed $260,000 to cover medical costs.

And while long-term care may not be something you will definitely need, having no plan for it could cripple you financially. According to the U.S. Department of Health and Human Services, average monthly nursing home costs can be as much as $7,700 per month.

The good news is that you can get long-term care insurance to help cover these costs, so you don't have to pay it all out-of-pocket. But it's essential to plan for that early on.

7. Retirement isn't just about the money

A key part of happiness for many people is maintaining an active lifestyles and a regular schedule. The transition from going onto work everyday to having an open schedule can be distressing.

Consider what you may want to do with your some of your time. Do you want to serve on boards of nonprofits or volunteer for a cause that's dear to you? Do you want to move to a new area or take up a new hobby? Start thinking about these things now so you are prepared mentally and financially to live the life want in retirement.

Planning is key to ensure you can lead the life you want in retirement and handle any surprises that may come your way.

The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or financial advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates. 

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