When you think of your retirement years, you probably imagine a relaxing and peaceful time in life. Enjoying time with your grandchildren and traveling more may be at the top of your list of things to do; however, there are several factors to take into account to help increase your confidence that your retirement will be financially independent and that you can do all the things that you want to do. The key to a financially independent retirement is strategizing ahead to avoid the top financial issues facing retired women in 2017.
Increasing retirement age
Starting in 2017, the age of full retirement will be going up incrementally from age 66 to age 67 by 2022. If you are ready for retirement, you can check out this chart to find out when your full retirement age is, based on your year of birth. Even though full retirement age is increasing, you are still able to start receiving your Social Security benefits at age 62, although at a reduced rate. To determine whether it is more advantageous for you to start receiving benefits at age 62, or whether it is better for your situation to wait until full retirement age so you qualify for the full benefit, consult the advice of your financial professional.
Even though you are at retirement age, as a woman, you may have taken time off when your children were little, or to help with an aging family member. Even if you had a good-paying job at the time that you took leave, you probably realized a stagnation of your wages upon re-entering the workforce—and the time off also interrupted your retirement savings going into a 401k or IRA. The loss in earnings, pay raises, and additions to your retirement account can have a profound effect on your income situation during your retirement years—especially if you find yourself single during your retirement years.
Low interest rates
Even though the Fed is looking to potentially raise interest rates, they are still historically low—and that means that your ability to earn money from your savings is greatly diminished. Any cash that you have in the bank, whether it be savings, money market, or a certificate of deposit, is probably only earning a trivial amount of money in interest. Because keeping your assets in liquid-type accounts is not advantageous right now with interest rates so low, you may want to explore other investment options with your investment professional. They can help direct you towards lower-risk investments that may be able to provide a higher yield than current market interest rates.
High living costs
Social Security increased 3 percent for 2017, which is slightly out-pacing the expected inflation rate this year, of 2.3 percent. While this core inflation rate does not take into account energy or food, those costs have remained close to the expected inflation rate. So while you may not realize much of an increase at the grocery store this year, you will most likely see an increase in food prices at restaurants when you eat out. Increasing wages and benefits among food service workers is one of the factors driving these prices higher this year.
While inflation is still relatively low, that is not all that is involved with your living costs. If you were to become single in your retirement years, either by divorce or the passing of your spouse, that could decrease your income drastically—and your standard monthly bills will unfortunately not decrease, such as rent/mortgage payment, electricity, water, and gas.
Uncertainty of healthcare costs
The Affordable Care Act brought about several changes and cuts to Medicare, and the uncertainty that comes along with the proposed American Health Care Act truly makes it difficult for retired women (and men) to plan for their healthcare needs and how that might affect their budgets.
High costs of long term care
As a woman, you probably know that your average life expectancy is longer than your husband’s, so it is prudent to plan for a longer retirement. With this in mind, it may make sense to look at a long-term care insurance policy, as well as work on your estate plan, to help protect your assets, have more say into how and where you may receive long-term care benefits and ultimately leave your assets to your heirs in the least costly, most efficient manner. But just as important as it is to plan for the worst-case-scenario, it is important to try to maintain a healthy lifestyle, stay active, and hopefully avoid long-term altogether.
Catherine Gareri, a Senior Associate with Finivi, works primarily with women going through a period of transition in their lives, or who are facing a new life challenge that may require difficult financial and emotional decisions to be made or at least considered, including caring for a loved one. If you need guidance navigating through a difficult life transition, or simply want help with your pre- or post-retirement planning needs, we can help. You can call (800)530-6635 for a complimentary consultation or click here to schedule online.