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Senior Retirement Concerns – Know Your Clients
This article is about the concerns that early retirees and retirees have about retirement.
The main concern of many people aged 45 to 65 is maintaining their current standard of living.
Early retirees often have concerns about:
- not maintain the current standard of living,
- healthcare/prescription costs,
- availability of Social Security,
- surviving assets,
- US dollar inflation,
- market conditions/performance during retirement,
- leaving legacy to children/heirs,
- impact of income taxes,
- pay for children’s education, i
- care for elderly parents.
Unlike previous generations, nearly 20 percent of American pre-retirees expect to continue working in retirement in order to supplement their retirement income or provide reasonable insurance coverage.
Lack of plan
According to some studies, only half (51%) of early retirees have completed a detailed retirement income plan. Some reports indicate that 31 percent of those born between 1925 and 1945 still do not have a retirement plan. Among those born between 1946 and 1955, 42% have no retirement income plan. The figure is even higher at 53 percent for those born between 1956 and 1964.
Early retirees are willing to make other sacrifices to have the kind of retirement they want, such as delaying retirement, saving more, and continuing to work in retirement.
Rising healthcare costs
Rising health care costs worry everyone and can eat up most of your retirement income. But Medicare only covers a percentage of medical bills and prescriptions for all Americans, so your clients’ out-of-pocket costs are likely to be large and grow in retirement.
Fact: A couple retiring today at age 65 will need an estimated $197,000 in savings to pay for lifetime health care costs — $260,000 if nursing home costs are included, study finds 2010 conducted by the Center for Retirement Research at Boston College.
Then there is the impact of taxes and inflation on retirees living on fixed incomes. When we look back over the past 65 years, the current highest and lowest marginal tax rates are comparatively low. Increased government spending on health care and other initiatives, combined with a growing deficit, could mean more chances for taxes to rise in the coming years.
Inflation may also be historically low today. In the wake of the Great Recession, the cost of living is likely to rise even for the most basic needs: food, housing, utilities. When you’re working, your wages tend to rise as consumer prices rise, so inflation isn’t usually a big concern. All this changes in retirement. When you’re living off your retirement savings, inflation presents itself as a significant risk. For many people in the critical years just before or after retirement, inflation can make things that have been staples of your lifestyle seem like luxuries.
Some retirees are forced to choose between paying utility bills and meeting their health care needs. And while Social Security and some pension programs adjust earnings for inflation, the money withdrawn from your retirement savings to cover living expenses is greatly devalued by inflation.
The good old days may not have been
If you thought the last few years were tough financially for seniors, it was nothing compared to the drought that followed the Great Depression of 1934. More than half of seniors then lived in poverty and often went hungry .
In 1935, our government came to their rescue and adopted Social Security. In the beginning, Social Security was a one-time payment rather than the lifetime monthly check of today. The first Social Security recipient worked a single day and paid in a nickel; it was withdrawn the next day and recovered 17 cents.
The first person to receive monthly payments for life was Ida Mae Fuller, who began receiving benefits on January 31, 1940, on her 65th birthday. Ida Mae had paid Social Security a total of $24.75 and her first Social Security check was $22.54. He lived to be 100 years old.
During his lifetime, he raised $22,888.92; it was a good annual investment for her.
Also, the workforce is changing. In the 1940s there were 42 workers per retiree. During the baby boom generation of the 1950s, the ratio had dropped to 16 to 1, and as of 2010, there are fewer than three workers per retiree.
Uncertainty creates unique opportunities for you to inform and educate your clients and prospects about tax-advantaged solutions for their retirement planning. Lifetime monthly income is more desired by baby boomers than wealth accumulation. Having an institution like a bank or insurance company that stands between financial success and failure is paramount.
Just ask your best prospects how they feel about their future monthly income. Today Social Security is in a precarious situation. Without immediate changes, it will not be able to pay the benefits promised to retirees.
It is not a political problem but a mathematical one. In 1935, when Social Security began collecting FICA withholding, the average life expectancy for a man was 60 years and 64 for a woman. However, Social Security payments did not begin until age 65. Today life expectancy is approaching 83, but Social Security begins at 67 at the latest.
Life insurance illustrations run up to age 120. Maybe our role is to educate our senior customers, not sell them a product.
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