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5 Shocking Truths About Not Saving For Retirement

Posted by : Premraj | Posted on : Saturday, October 14, 2017

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Your retirement may be decades away now, but it will arrive one day. While we all hope our sunset years will be serene and slow-paced, without some advance planning, your golden years could be the most difficult time in your life. How so? If you don’t have the finances to keep up with expenses, as well as have some extra spending money for hobbies and travel, you could find yourself still punching a timecard into your late 60s, 70s, and beyond.

We all know that we need to save for retirement. Yet, a shocking 50 percent of Americans over the age of 55 find ourselves without the requisite savings.

Here are five sobering truths about failing to save for retirement:

1.  Your Medical Costs Increase Dramatically With Age

High blood pressure, osteoporosis, cognitive issues, and more are a natural part of the aging process. You can go months—or years— in your 20s and 30s, without taking prescribed or over-the-counter medication. That changes for most of us after age 40. In the U.S., nearly 35% of people take medication after age 65. Also, treatment for the most common health problems to affect us later in life can be prohibitively expensive.

Serious illness regularly bankrupts people in their 30s, 40s and 50s. For seniors without a solid financial cushion, the consequences can be catastrophic.

2.  You Will Likely Live Longer than You Think

For the average working person, a couple hundred thousand dollars sounds like a lot of money. To a great extent, it is. However, one aspect of retirement is sometimes lost on individuals determining whether such an amount of money will be enough. Keep in mind, you might live for two or three decades with no ability to perform meaningful, well-paid work.

The wonders of modern medicine have meant we can no longer call life short. While this is great news, it’s likely to exact a heavy toll on your finances even if you end up living a relatively illness-free retirement. What many people believe is adequate savings is actually only sufficient for 10 years or so.

3.  Life Will Throw You Curveballs

Retirement is full of known unknowns. We don’t know when, where and how illness or medical problems will occur, but they will happen. One known is that life will throw you curve balls.

Take a man with a good job in his 50s who, in the early 2000s, used his retirement savings to settle a large loan with the expectation that his very high salary would easily shore up his retirement account later. Unfortunately, the 2007 to 2011 recession and financial crisis struck and he lost his job. Now, in his 60s, he can’t find a job that will match his previous salary. Any plans he had to travel the country with his wife in their retirement will be put on ice. The lesson here is to always anticipate the worst.

4.  One Asset Class is Never Enough

When it comes to saving and investment, diversification is the name of the game. As the previous point on known unknowns demonstrates, putting all your eggs in one basket poses a serious risk to your financial future. Price collapse, economic downturn, new regulations or systemic problems can whittle down or wipe out your savings overnight.

Spread your savings across multiple asset classes including equities, bonds, real estate and cash. Go one step further and purchase different assets within each of these classes. Take advantage of investment tools to keep tabs on asset performance so you can know if and when to exit any of them.

5.  The Government Might Not Take Care of You

Many Americans believe that social security will more than cover their living expenses during retirement. This is a costly assumption for two reasons. First, in most parts of the country, social security disbursements are not anywhere near enough to live a comfortable, well-rounded life.

Second, and more worrying, social security might not even exist by the time you get to retirement age. The U.S. Treasury expects these funds to be exhausted by 2034. For anyone who won’t have saved enough by then, this is a frightening prospect.

Retirement planning is not something you can afford to put off to tomorrow. Whether you are in your 20s or 50s, lining up the building blocks early is the key to realizing the quality of life you want in your later years.

 

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