Looking ahead to retirement? The days when you leave the workforce definitely loom somewhere in the distance, whether that distance is near or far.
The fact is, the sooner you start planning, the more prepared you will be. And, the more prepared you are for retirement, the less likely financial hardships will interfere with your future peace. Therefore, keeping tabs on retirement trends is an important endeavor.
From how long retirement funds now need to last to post-retirement employment, several trends are worth watching as you plan. Take a closer look at retirement trends to watch right now.
There has been a grand shift in the avenues Americans take to save for retirement. Some work directly with their own retirement planner to create a financial plan for the future. Plus, many more Americans have a solo 401k due to self-employment.
There is perceived value in having direct control over a retirement plan. For example, more Americans are educated about investing in stocks and bonds. Therefore, they feel more confident taking the reins with retirement fund investments.
Even though workplace retirement plans are ideal, only a fraction of the American population takes part. Whether it's an employer-supported 401k or otherwise, only around 60 million workers sign up.
In spite of the fact that life expectancy declined in 2020 due to the pandemic, long retirement is still very possible. And the length of retirement for most Americans is still increasing.
One in 5 65-year-old men will reach the age of 90. Likewise, around 35 percent of women who are age 65 will do the same. Longer lifespans are great. However, this also means that a lot of retirees are underprepared for the many years they have left beyond retirement.
With more years in retirement, earlier planning and saving grow even more important. Instead of planning for 10 or 20 years of relying on retirement savings, more time should be anticipated.
Planning for expenses is one of the most important parts of planning for retirement. Several expenses must be accounted for, but healthcare costs are one of the biggest. Many retirees will rely on insurance coverages offered through Medicare.
Nevertheless, Medicare doesn't cover everything, and plans can vary. Unfortunately, underestimating healthcare costs leads to insufficient retirement funds for financial support in the long term.
Consider the following numbers. The average out-of-pocket expense for households with Medicare in 2019 was over $6,800. This means if you live for 10 years after retirement, you need at least $68,000 to cover medical expenses. As noted earlier, most retirement funds will have to cover far more than a decade. Medical care costs can constitute 13 percent or more of total expenditures for seniors.
A lot of people (63 percent, in fact) anticipate keeping some type of employment even after they retire from their full-time positions. Keeping some type of employment and a steady income stream can definitely prolong retirement funds. However, even with intentions to do so, most retirees do not remain employed.
One of the most prominent reasons retirees do not remain employed is their health or physical limitations. For many, finding fitting employment is not feasible in the face of illness or challenges.
Only about 15 percent of retirees work in their retirement years. Those that do typically hold part-time positions. Part-time income can help retirees hold off on collecting Social security payments and using up their retirement funding. However, the best-laid plans will be made with the understanding that post-retirement employment may not be possible.
For the longest time, retirement portfolios were most commonly made up of three types of assets: Cash investments, stocks, and bonds. While those traditional investments are assuredly valuable for retirement, alternative investments now take up more space. The average retirement portfolio or plan does involve some type of alternative investment.
Alternative investments exist outside the influence of traditional markets. Further, they come in many forms. Therefore, they can be a good way to pad a portfolio with assets. Several types of alternative investments exist, such as real estate, cryptocurrency, luxury goods, and venture capital.
Since investing in alternative assets is easier now thanks to technology, more people do take advantage. A large portion of retirement portfolios contains some type of alternative asset. Additionally, in modern times, these assets sometimes account for more than traditional assets.
As it goes with every facet of finance in life, the only true thing constant is change. Therefore, keeping an eye on the constantly evolving retirement trends is a smart financial decision. Simple things like longevity and medical expense inflation totally dictate how long your retirement fund lasts. Likewise, certain investment moves now totally alter the course of your financial future later.
Be sure to work with a retirement planner to get your retirement in order. Revisit often to adjust as the tides of time influence the finances of your future retired self.