Because of increasing life spans and legislative uncertainty regarding government entitlements, the rules for retiring keep changing. One of the main problems today’s retirees face that their predecessors didn’t is the uncertainty resulting from the government's consideration of changing long-time entitlements to trim America’s budget deficit. Understanding issues that affect retirees’ financial situations will help you take steps to manage your money in the most effective way possible.
Longer Life Spans
One of the blessings of improved health care and healthy lifestyle choices includes a longer life. Longer life, however, means more money needed for housing, food, taxes, health care and other living expenses. For example, when Social Security was introduced, the life expectancy of males was 58 years, with females expected to live until 62. Baby boomers are now expected to live into their 70s, on average, with many living much longer. Retirement savings targets you set when you were in your 30s probably aren’t realistic any more. As you consider your retirement planning, calculate life expectancies into your 80s and 90s, depending on your current age and expected health and fitness levels.
Unlike earlier generations, today's retirees face the possibility of fundamental changes to Social Security, Medicare, Medicaid and other public entitlements. The tax rates you’re paying on your investment income can change at any time. If you’re set financially only if current laws don’t change, meet with a financial adviser to determine what changes on the horizon might affect your income, taxes and access to health care -- before new laws take effect.
A volatile stock market produces less-stable incomes, with some retirees either eating into the principal of their savings or using home equity loans or credit cards to pay living expenses. This credit use comes with interest charges and other fees, increasing your living expenses. If you’re using credit, shop wisely before you commit to any card or loan. Find cards with low annual percentage rates and no annual fees, such as those offered by credit unions. When possible, transfer high-balance amounts to a new card that offers a 12- to 18-month zero percent interest rate on transfers.
Housing Value and Expense Fluctuations
The housing crash that started in 2007 might have bottomed out in 2013, but the long market decline has shown that home ownership, once a stable asset choice, is a more risky proposition today. As housing prices rise, so do property taxes, even though you’re not generating income from your home. As homes age, they need more maintenance – you might look for a good home warranty to cover your aging water heater, appliances and heating and cooling system.
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