Even the best-laid plans can’t account for everything, especially when it comes to planning your retirement. You can’t predict how long you’ll live, how much prices will rise or what your health care costs will be. Fortunately, your advisor can recommend strategies to help mitigate some of the unknown and unexpected. But before we talk solutions, let’s look at some key risks. Calculator: How long will your retirement savings last?
A long, healthy retirement is everyone’s goal, but what if you outlive your savings? Almost half of all 65-year-old couples today will see at least one member reach age 90.1 That’s 25 years of retirement or more! While that may be welcome news, what happens if your money doesn’t last as long as you do? If your sole source of guaranteed income in retirement is Social Security, it may not be enough to maintain your lifestyle in retirement. You might need a product that offers you the supplemental income you need to meet your financial obligations.
You probably know that inflation makes things more expensive. For example, according to the Consumer Price Index, the price of eggs has nearly doubled and the price of bread has more than doubled over the last 30 years. That means the $20 in your wallet today can’t buy as many groceries—or other things—as the $20 in your pocket could back then.
What happens if your money doesn’t last as long as you do?
If your retirement funds can’t keep up with inflation, your money will lose its buying power over time.
Learn more: Will inflation take the air out of your retirement savings?
Health care costs
When you enter retirement, remember that health care costs increase as you age. A recent Fidelity study reported that a 65-year-old couple who retired in 2016 will need an estimated $260,000 to cover health care costs in retirement.2 Do your guaranteed income sources have growth potential to accommodate rising medical expenses?
Everyone knows to plan for housing, food and medical costs, but other expenses sometimes slip past the radar or increase more than expected in retirement. Club memberships, association dues, vehicle costs and even rising property taxes may not be accounted for or could rise in retirement. If you’ll be on a fixed income in retirement, you might have to make difficult choices to maintain your current lifestyle.
So, what can you do?
Ask your financial professional or insurance producer about fixed indexed annuities (FIAs). FIAs can offer growth potential for your money and typically provide income that may help you keep up with inflation and other unpredictable costs. They provide guaranteed income payment options you can’t outlive that can supplement Social Security and other income sources.
No one can predict everything you will encounter during retirement, but a FIA may provide the flexibility and growth you need to be well-prepared for the lifestyle you envision.