Current Retirement Challenges: What To Know

Preparing for retirement is complex for many reasons. With improved medical care, a person retiring today at a typical retirement age may need their savings to last 30 years or more, making it necessary for retirement funds to sustain a longer life span. There are additional challenges when planning for retirement; here are a few to keep in mind:

Less Support from Employers. More companies have replaced pension plans with defined contribution plans, adding responsibility to the employee. The rise of entrepreneurs leaves many without access to an employer-sponsored plan, creating a need for a self-started, individual retirement plan.

Shrinking Social Security. Since 1975, Social Security law has decreed that benefits be adjusted annually to keep pace with inflation, referred to as the Cost of Living Adjustment (COLA). There is no requirement that this adjustment produce a yearly increase. In 2023, COLA was 8.7%, the largest increase since 1981. It will increase 3.2% in 2024. The increase does not always adequately reflect the growth of some of the more costly expenses retirees encounter, such as health care, property taxes, home repairs, and homeowner’s insurance.

Rising Health Care Costs. It’s no secret health care costs have increased drastically in recent years, and the later years in life often account for the highest expenditures. Having the right type of health care you need within your budget is essential. It’s also important to consider potential out-of-pocket costs, long-term care needs, and gaps in coverage due to retirement age and Medicare eligibility.

Low Inflation. While low inflation rates sound positive for individuals on fixed incomes, they also provide low earnings on money in savings and conservative investments like bonds and CDs. Retirees may need to take on some risk to increase earnings to sustain financial requirements in retirement.

Planning for and managing retirement is complicated in every economic environment. Whether your retirement is just around the corner or in the distant future, we’d be happy to discuss strategies to ensure your retirement funds set you up for a successful retirement and hedge against the challenges retirees face.