Retirement planning is not as simple as you think. There are so many things that you have to consider. It is just like creating a forecast report for your business. You have to make assumptions about your future and think about how you can reach your targets. It is not enough that you create a photo of what you want to happen. It is easy to say that you want to target a million dollars worth of sales in 2016. It is a different matter to actually create a plan so you can reach that million dollars.
The same is true for your retirement. When you plan what you want to happen, you have to be true to what you want when you retire. This will help define what you need to do during your pre-retirement years. At the same time, you also have to be honest about what you can actually reach. That way, you will not drive yourself crazy trying to reach goals that are actually beyond your abilities. After all, if you are earning a minimum wage with 3 children to feed, it is very hard to have a million dollars when you retire.
Regardless of your current financial situation, retirement planning is necessary if you want to be able to save anything at all. Even if you earn the minimum or you have a 6-figure income, you need to plan your every move so your retirement will not be compromised by the unexpected events that you will encounter as you live your life.
To make your planning more effective, you have to consider the different factors that will affect your retirement targets. While it is tempting to focus on the financial aspect of things, you also have to consider the non-financial areas that have a huge effect on your retirement.
One of the important aspects is your health.
3 reasons your health should be considered while planning for retirement
Surprisingly, a lot of us do not really think about our health during retirement planning. Admittedly, most of us focus on the amount that we have to pay. We think about the food, our home, transportation, activities and all the other stuff that retirees must spend on. Although we know that our health is important, a lot of us fail to realize just how important it really is.
To convince you of the importance of considering your health during retirement planning, here are three reasons why it is something you need to think about carefully.
Health care costs
Let us start with the health care cost. If the inflation rate is rising a lot faster than our income, you should see how the cost of medical care is rising. It is astounding how expensive it is to get a good quality medical treatment nowadays. This is especially true for retirees. As you get older, you become prone to health ailments because your physical body went through some serious beating in your youth. The daily work routine and the personal chores that we had to attend to took its toll in our bodies. We will only feel them when we get older. This is why you have to expect that one of the biggest expense that you will spend on during retirement will involve your health. According to the data published on HVSFinancial.com, the average retirement health care cost for a 65-year old healthy couple is $266,589. This is for those who are covered by Medicare Parts B, D, and a supplemental insurance policy. The data revealed that if you include the total healthcare cost (dental, out-of-pockets), it will reach $394,954. The data revealed that the annual cost for a 65-year-old is $6,999 and it gets higher as the retiree gets older. This is the reason why it is very important for you to consider your health during your retirement planning.
Another reason why you need to consider your health during retirement planning is for the lifestyle requirements. After all, your lifestyle will revolve around your health. If you are healthy, you do not need to change much about your expenses. However, if you have an ailment, you need to consider your health first. For instance, you may be able to save on transportation costs if you are healthy enough to bike your way around town. But if your health cannot manage that because of a respiratory ailment, then you need to spend on a car. Some medical condition will require you to spend a lot on medicines – most of which are maintenance pills that will help keep your ailments at bay. You have to factor in these costs so you will not fall short on your retirement budget.
Finally, you have to consider your health to determine your life expectancy. This is actually the main reason why you have to be serious about your retirement planning. According to the data from CDC.gov, the average life expectancy in the country is 78.8 years. If you are really healthy, you can go beyond this. In case that is true, you have to make sure that you will not outlive your retirement money. Otherwise, you will be spending the rest of your life begging for money to support your basic necessities. Let us try to avoid this from happening by considering your expectations when it comes to life expectancy. An article published on USNews.com, the average spending of a typical retired household is $40,938. If you retired at the age of 65 and intend to live until you are 80, you need to have at least $614,070 in your retirement fund.
These are the three main reasons why you need to consider your health when you are planning for your retirement. If you do not think about your health, you might end up falling short when it matters the most. The main concern of a lot of retirees is outliving their money. You do not want that to happen while you are trying to battle an ailment. You want to have the freedom to live a comfortable retirement that will allow you to enjoy the fruits of your labor when you were younger.
Other important considerations in your retirement plan
Apart from your health, there are other things that you need to look into when you are making plans for your retirement. Here are three of them.
Your debt can eat up a huge percentage of your retirement money – especially when you are drowning in debt. Try not to share your retirement money with your creditors and lenders. Make sure you pay it off before you enter retirement. That way, you can enjoy the life that you want to live without worrying about any debt collections.
Other retirement income sources
If you have investments or any passive income, it is important to take them into consideration during retirement planning. These can boost your finances while you are retired. If you are one of the lucky few with a diverse source of income, you do not have to stress yourself out trying to save a lot of money before you retire. You can probably cut yourself some slack. And if you have a reasonable amount going for you, it could be possible for you to retire early.
Finally, you have to think about where you plan to retire. Some people are able to retire for less because they chose to live in a state or city that is budget-friendly for retirees. These are the places that offer lower cost of living and great benefits for retirees. If you do not mind relocating, you can actually set a lower target for your retirement plan. That should ease some of the stress associated with saving for a huge retirement fund.