And Caregiving Can Take a Financial Toll.
Deb’s note:
I asked Jane Gore to write this article because the statistics for caregivers are staggering: the average income lost by caregivers each year is a whopping 33%. It is never to late to plan for your retirement and as your circumstances change, revisit any plan that is currently in place.
Jane Gore MBA, RICP of Nolan Wealth Management, LLC
You may have had an idealistic vision of what your retirement would look like. As a woman, you may have had to temporarily put aside your career to take care of your family. The Institute for Secure Retirement reports that women typically work 12 fewer years than men. In addition, an income gap between women and their male counterparts when employed, means that women are contributing less to Social Security, and therefore are eligible for smaller benefits. Another factor is that women have a longer life expectancy than men.
These factors combined create the financial challenge women face as they plan for their retirement. Sound retirement planning is critical and can be easier when working with your financial advisor.
The biggest challenge for women planning for retirement is the need to budget for higher healthcare costs. AARP indicates that 70% of more of nursing home residents are women whose average age of admission is 80 years or older. Because women live longer, they are more likely to spend time in an assisted-living residence or require home-care. Widows, single women and divorcees may have fewer people around to care for them. In the planning process Long-Term-Care insurance might be considered to help cover the costs. However, premiums are pricey, especially for women. Married women can reduce premiums by purchasing a shared-benefits policy that provides a pool of benefits both spouses can use. There are other insurance options such as a hybrid policy that combines long-term-care coverage with life insurance.
Keeping these challenging factors in mind, the first step in planning your retirement is estimating what you believe your annual retirement expense will be. Start by examining your current expenses. The difference between your current expenses and your retirement expenses may be small. However, if you retirement is many years away, the difference may be significant, and projecting future expenses, including possible inflation, may be more of a challenge. It is most important to include in your retirement planning the premiums you may incur at age 65+ for Medicare Part B (which covers doctor visits and outpatient care), along with supplemental insurance, such as Part D (for prescription drugs), and/or a Medigap policy (Part C) to cover out-of-pocket expenses. If you currently have a high-deductible health insurance policy, you might want to open a Health Savings Account and put aside money to cover out-of-pocket health care costs. As you plan, you need to consider that there will be areas within your control such as spending; areas you might have some control over such as the length of your employment; and areas you will not have control over such as taxation policies and market returns.
You might consider postponing retirement if your expense calculations are greater that your income, and continue saving.
To help you get started, here are some common retirement expenses:
- Food and clothing
- Housing, Rent or mortgage payment, property taxes, homeowners insurance, property upkeep and repairs
- Utilities, Gas, electric, water, telephone, cable TV
- Transportation: Car payments, auto insurance, gas, maintenance/repairs, public transportation
- Insurance: Medical, dental, life, disability, long-term-care
- Health-care costs not covered by insurance: Deductibles, co-payments, prescription drugs
- Taxes: Federal and State income taxes, capital gains tax
- Debts: Personal loans, business loans, credit card payments
- Education: Children’s or grandchildren’s college expenses
- Gifts: charitable and personal
- Savings and Investments: Contributions to annuities and investment accounts
- Recreation: Travel, dining out, hobbies, leisure activities
- Care for Yourself, Your parents, or others: Costs for nursing home, home health aide, or other type of assisted living
- Miscellaneous: Personal grooming, pets, club memberships
- Cost of living increases
- Inflation
- Health Care Insurance increases
With thanks to Jane Gore MBA, RICP of Nolan Wealth Management, LLC.
Jane has been in the financial services industry for more than 30 years. She has focused her career on providing financial solutions to all aspects of her clients’ financial lives, including asset allocation, retirement planning, and college planning.
Nolan Wealth Management, LLC, and Jane Gore, MBA, RICP, offers securities and investment advisory services through Summit Equities, Inc. Member FINRA/SIPC, and financial planning services through Summit Equities Inc.’s affiliate Summit Financial Resources, Inc. 4 Campus Drive, Parsippany, NJ 07054. Tel. 973-285-3600 Fax. 973-285-3666. Summit Financial
Disclaimer: The material in this blog is for educational purposes only. It is not intended to replace, nor does it replace, consulting with a physician, lawyer, accountant, financial planner or other qualified professional.
