The fact that many Americans are living a longer life brings some consequences along with it. As we live longer and think about living longer, we increase our stress over finances and health in the future. The concern about living longer than our money lasts is a very real one, one that many people try to combat with annuities. Stressors in retirement are very real because many Americans have not saved enough money, health care costs are going up as we age and need more care, and the helpful programs of the past face an uncertain future. This includes federal cuts in both social security and Medicare in order to balance the government’s budget. So is the future hopeless? Not at all and in “8 Financial Strategies for a Long Life,” Philip Moeller of U.S. News & World Report tells us how we can better prepare for the future.
No one really wants to cut their spending now, but that is the best way to ensure that you have more money in the future. America’s new normal is the fact that we need to consume less in order to save more and be smart about retirement. This article’s author recommends maintaining investments in target-date funds even in older years. He believes that the best way for older investors to make gains on their money is to remain invested in stocks late in life. A combination strategy with annuities that pay a lifetime stream of income and some money in stocks could be a winning strategy. Next, account for future inflation when making your retirement plans. Whether using an inflation-adjusted annuity or TIPS, be sure that you consider inflation of up to 4% because that can really change your fixed income spending abilities.
Take care of your health. Health care problems will hit you harder than any other problems in old age both financially and physically, so exercising and eating healthy are the easiest ways to try and avoid major health problems in your older age. Plan for your insurance coverages to last longer, whether it be over your lifetime or into your 80’s. You used to be safe having insurance until your 70’s or until your children were grown, but insurance coverage needs to be extended as life expectancies increase. In addition to increasing basic insurance coverage, looking into purchasing long term care insurance or making early preparations of your house if you’d like to live there in your 80’s and beyond. Long term care is ridiculously expensive, so preparing for that well before the care will actually be needed is a good way to protect your finances in retirement.
Longevity insurance is becoming more popular to help with the costs of living when older than 80. These annuity products don’t start making payments until you are 85 or so. It might seem risky to buy this type of insurance because many people don’t live to age 85, but you’ll be thrilled to have the income if you do and longevity annuities are fairly inexpensive when it comes to annuity products overall. Women are at more of a risk of having financial problems in retirement for a few reasons. They typically live longer, many don’t work for a portion of their lives so they have less money saved and lower social security payments, and more women become widows than men becoming widowers. Losing a spouse means around half of the income coming in could be gone, especially if couples are relying heavily on social security. Plan, plan, plan for your financial future and you will be way ahead of the game.
Written by Rachel Summit