No matter how far out you are from retirement, it’s important to plan ahead for a secure financial future.
Though most people know that they need to save enough to cover basic living expenses during retirement, many overlook other common – and costly – expenses like medical and long-term care services. Many retirees require medical services that aren’t covered by Medicare, and some face housing and other long-term care needs they didn’t anticipate when saving for retirement.
The good news is that there are products and services available to help prepare for and manage these costs, including long-term care insurance, which can protect retirees’ assets by paying for long-term care services and supports in various residential settings, including your own home. When planning for your financial future, it’s important consider expenses like like-term care and identify options for covering them that work for you.
Here are five steps you can take now to help you plan:
Track down today’s money. Track down all your workplace retirement plans like 401(k), 403(b), SEP-IRA, SIMPLE IRA and pension accounts. Also, do the same for any non-workplace assets like an IRA, home equity, personal savings and investments.
Calculate future money at retirement and after. Estimate how much the assets could be worth at your retirement. This “guesstimate” will give you some idea of how much income you may have for your retirement years.
Consider future expenses. Look at your expenses today and estimate how they will change during retirement – not just increasing costs for medical expenses, but you might also have some expenses that decrease, like clothing. Then estimate how inflation might affect these expenses between now and retirement.
Compare income and expenses. Compare your estimated retirement income with your estimated expenses and see how they match up. This will show you whether you need to save more for retirement – and if so, how much more.
Make your money last. More saving and less spending will boost your confidence and financial bottom line. And if you’re coming up short, you might consider working longer as circumstances permit or delaying receiving Social Security benefits.
November is Long-Term Care Awareness Month, a great time to learn more about long term care insurance – what it covers, what it costs, and more, to see if it is an option you want to include in your retirement planning. The Department of Labor also has resources to help you plan, including “Taking the Mystery Out of Retirement Planning” (also available en Español). And you can use our calculators and interactive worksheets to save and track your progress.
Ali Khawar is the acting assistant secretary for the Employee Benefits Security Administration.