Quality of Life
Happily ever after is only the beginning.
Retirement isn’t what it used to be. It’s longer. It’s more active. And it’s harder to predict.
Many of today’s retirees can expect to spend 30 years or more enjoying the fruits of their labor. That’s why it’s increasingly important not simply to plan for retirement, but to plan for longevity in retirement – all of the years it might last, all of the ways your life will change and all of the events you can't foresee.
In addition to the financial implications – how best to save and how much – retirement has life implications as well:
- As you get older, changes in your health could mean less independence.
- Shifts in your abilities – and mobility – could impact access to things you enjoy.
- Your social circle likely will shrink.
Mind the Gap: Prioritizing retirement needs, wants and wishes
At times, a retiree's reliable income is not enough to cover essential expenses, be it due to lower reliable income, unexpected economic factors or rising costs of living. This leaves a gap, the difference between income and vital expenses. Retirement assets first should be allocated to fill this gap, before being spent on secondary wants and wishes.
- Reliable Income Pays for Needs
- Income Gap
- Retirement assests Support wants and wishes + fill potential gap in income for needs
Key decision dates and important milestones
Ages 50 to 59 are crucial longevity planning years – retirement is more than a faraway notion, but far enough away that you can adapt.
50 Eligible for IRA and 401(k) catch-up contributions
55 Eligible for penalty-free, separation-from-service withdrawals from 401(k)s
59½ Eligible to begin penalty-free withdrawals from IRAs and 401(k)s
62 First eligible for Social Security with reduced benefits
65 First eligible for Medicare
66 Full retirement age (FRA) for Social Security if born between 1943 and 1954 (FRA increases two months for every year from 1955 to 1959)
67 Full retirement age for Social Security if born 1960 or later
70 Maximum Social Security benefit (you must begin taking benefits)
72 Required minimum distributions begin the year after you hit this age
Key retirement questions
Where your retirement money goes
Wealth alone cannot buy a quality retirement any more than it can buy happiness – but having a solid financial foundation can make those years more enjoyable. As you consider a long, happy retirement, give some thought to the most expensive aspects – housing, transportation, healthcare and food – the effect of inflation and how to budget for it all. Entertainment should be included, too, since social activities enhance your physical and emotional well-being. Keep in mind that these percentages will vary as life changes, so it’s a good idea to account for the biggest line items as you plan for the future.
Source: Consumer Expenditure Survey (average annual expenditures for individuals 65+), U.S. Bureau of Labor Statistics, August 2016
- 19.2% Other Combined, the categories here rival transportation, but not a single one counts for more than 5.3%. Line Items: Education, Clothing, Gifts, Insurance, Taxes, Personal care products
- 5.5% Entertainment Line Items: Pets, Hobbies, Fees and admissions
- 12.3% Food Fortunately, this major expense is one that you have a lot of control over. Line Items: Basic groceries, Specialty items, Dining out, Beverages
- 12.9% Healthcare The average couple age 65 to 92 pays $400,000 out of pocket. Line Items: Premiums, Prescriptions, Medical supplies
- 34.8% Housing Housing and related costs have a major impact on the retirement budget as well as your comfort, particularly if you want to live independently at home. Line Items: Mortgage, Taxes, Insurance, Maintenance, Utilities, Age-in-place renovations
- 15.3% Transportation Surprised? Transportation is critical to your freedom, your independence and your ability to meaningfully engage with others. Line Items: Car payments, Fuel, Insurance, Maintenance, Public transportation, Travel expenses
Planning for a long, happy life
At Carlyon – Stoops Family Financial Planning, we specialize in planning for a full financial life. We take a holistic approach to retirement planning – one that goes beyond investment account strategies to consider all of your needs, your wants and your wishes. Some of it will be exciting – dream homes, travel, time for family and hobbies. Some of it will be uncomfortable – the possibility of a health issue or need for long-term care. All of it will be on the table – and part of your comprehensive longevity plan.
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