Ready for Retirement? Might Need Some Bucks in Savings and Some Luck

Are you focused on retirement planning? Retirement planning allows one to plan for one's financial future and maximize retirement savings. You face obstacles like economic downturns and long-term health care. Planning helps you be prepared.

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Ready for Retirement? Might Need Some Bucks in Savings and Some Luck
8 Min Read February 15th, 2023

Retirement is often seen as a symbol of the American Dream. We want to work hard and save money to enjoy the "golden years." However, those golden years are "golden" because of the amount of money it takes to enjoy a retirement in the lifestyle you wish to have when that day comes.

Having adequate retirement savings is a sign of financial success and stability, which inspires hope and confidence in a secure future. Planning will help make those days enjoyable once you decide the 9 to 5 is over.

Retirement planning also provides peace of mind that even if something unexpected arises, you have a nest egg to help you through. Many obstacles can get in the way of having that successful retirement. Inflation and long-term health care costs can derail any plan unless you have prepared for it in advance. 

Don't Run Out of Money When You're Old!

The point is you want to have enough money to last your lifetime since longevity is a significant planning concern. Many people wish to create a legacy for their children and grandchildren, leaving them with a financial inheritance once they're gone.

In about 40% of the 384 U.S. metropolitan areas, retirees now need more than a million dollars to support their standard of living. According to a LendingTree research study, you would need an average nest egg of about $1.07 million. However, that is a national average. If you live in San Francisco, you would need about $1.07 million. 

According to a LendingTree analysis, a retiree in San Francisco needs close to $1.37 million. But if you retire in Johnstown, PA, you can get away with just under $800,000. You remember the saying, "location, location, location.)

The study is based on the amount seniors spend annually and the median yearly earnings of those between the ages of 55 and 64; the new LendingTree analysis determines how much individuals need to retire in each U.S. metro region. 

Location, Location, Location

According to LendingTree senior economist Jacob Channel, many factors contribute to how expensive life is in any part of the country you may wish to live or move to once you retire. 

Ultimately, each metro is unique and will have its own quirks that can make it more or less expensive. This is true of metros that are ostensibly similar or that are in the same state. Anyone thinking about retiring in a given area should thoroughly research it before packing their bags and moving.

Channel says you should avoid having preconceived notions or vague ideas about an area dictate whether you choose to live there.

Retiring Early? Better Prepare

What if you want to retire early? How much money do you need to retire at age 55 if you're considering early retirement? The amount of money you ought to have saved can vary depending on several things.

However, if you want a general guideline, financial experts advise that you should save at least seven times your annual salary by the time you are 55 years old.

The amount you must save is greatly influenced by the age at which you intend to retire. If you delay retirement, your savings have more time to grow, and your Social Security payment is larger. 

Fidelity Investments says you should save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.

Consider Future Expenses

While most people will cut back on spending once they retire, consider things that you want to do when you do retire, such as travel. The idea is to enjoy retirement.

Not only do you accumulate money while you are working, like in your employer's 401(k) plan, you need a plan to protect those assets when you get older.

Some things are likely to happen, but you don't know when or the financial impact. Economic downturns and/or inflation can significantly influence your savings and the cost of living in the future. However, you don't know when these things will happen. 

Declining Health and Long-Term Care

There is more. What happens when your health starts declining and you need long-term health care? As you age, you can experience several health and age-related issues like chronic illness, mobility problems, dementia, and frailty. Long-term care costs are your responsibility unless you qualify for Medicaid and have little or no income or assets. Traditional health insurance and Medicare (including supplements) will not pay for most long-term care services. Care costs are costly, and these costs are rising rapidly.

Take a 50-year-old today. If this 50-year-old needs long-term health care at age 80, what will it cost? The cost depends on the type of service required and where someone lives.

Let's say they live in Johnstown, PA, and need in-home care in the year 2053; a 44-hour week of in-home care is expected to cost $8,254 a month (that is a median average). In 2023 that cost would average $3,712 a month.

Johnstown, Pennsylvania Long-Term Care Costs| LTC News Cost of Care Calculator

Assisted living, memory care, and nursing home cost will average even more. 

However, if that same 50-year-old lives in San Francisco, 44 hour work week for in-home care will average $15,397 a month in 2053, up from $6,923 a month in 2023. In San Francisco, the facility cost is tremendously more costly. An assisted living facility's base cost will be $13,431 a month in 2053. That is the base cost, as surcharges will be placed on top of that amount. Nursing home? Most people don't get to a nursing home, but when you do, those costs will average $30,075 a month in 2053.

San Francisco, California Long-Term Care Costs | LTC News Cost of Care Calculator

These are real costs, and the likelihood you or your spouse will need some long-term health care is high. There is a planning solution (on top of contributing to your retirement savings.)

I Plan on Retiring in Another State. How Does That Impact Long-Term Care Planning?

LTC Insurance Offers Quality Care Options and Asset Protection

Long-Term Care Insurance will provide you with guaranteed tax-free benefits that can be used to pay for your choice of quality care services, including in-home care. The benefits grow with inflation, so as you get older, your benefits increase (not your premium.)

What Is Long-Term Care Insurance & What Does It Cover?

There are several types of plans, including joint spousal policies, policies with death benefits, and cash benefit plans. Tax incentives available for some people can make the premiums even more affordable.

Don't forget long-term health care is more than just a cash flow problem. Long-term care will have substantial consequences on your family as well. Without any plan, your adult children will be responsible for everything from caregiving to managing your care and liquidating your assets. Remember the emotional impact it will have on those you love as well.

A few things to consider:

  • Business owners have tax deductions available and do not have to offer the benefit to employees. However, a business owner can pay for their spouse. Despite the tax deduction, the benefits remain tax-free.

  • Some states offer state tax credits or deductions for those with LTC Insurance. Some individuals may qualify for federal tax incentives as well. Those with a Health Savings Account can use the pre-tax money from the account to pay for the premium. 

  • Most states offer partnership policies that provide dollar-for-dollar asset protection. This allows you to shelter part of your estate and still qualify for Medicaid if you exhaust your insurance benefits. 

  • Hybrid Long-Term Care Insurance, while more expensive, offers a death benefit. 

Types Of Long-Term Care Insurance Policies & Which Is Best For You

Get Expert Help for Planning

Be sure to seek the advice of a qualified Long-Term Care Insurance specialist to help you plan and match your age, health, and family history with the best insurance company. Premiums and underwriting vary widely. Don't expect your financial advisor or general insurance agent to help you here; specialists have more knowledge and experience and work with all the top companies.

A Long-Term Care Insurance specialist will interview you and provide accurate quotes from all the top companies, along with professional recommendations. 

Be careful that the specialist is really a specialist. Most specialists have experience beyond years in the industry, but the number of people they have helped with long-term care planning. A specialist will usually work with most of the top companies in the industry and be familiar with policy design, claims, partnership, and underwriting.

Generally, most specialists have helped 500 or more people directly in their careers, and some have helped thousands.

Most people get Long-Term Care Insurance in their 50s or even younger. Don't delay, as health can interfere with your ability to get an affordable plan.

Retirement Planning Steps

Here are some of the steps you should have in place for retirement planning:

  1. Establish a Budget: Establishing a budget allows you to identify short-term and long-term financial goals, create an action plan for reaching those goals, and measure progress. 

  2. Maximize Retirement Accounts: Take advantage of tax-sheltered programs, such as IRAs, 401(k)s, and other employer-sponsored plans, to save money for retirement. 

  3. Evaluate and Prioritize Needs: Identify needs and prioritize them based on importance. This allows you to determine the best approach to achieve each need. 

  4. Develop A Withdrawal Strategy: Develop a system for withdrawing funds that minimize taxes and maintains a steady income stream. 

  5. Create a Risk Plan: Analyze potential risks, such as a market downturn or life-changing event, and develop a risk plan to manage these risks. 

  6. Invest in Long-Term Care Insurance: Taking out a long-term care insurance policy allows you to prepare for the cost of long-term care without depleting retirement savings.

Also, don't delay thinking about retirement. Retirement planning should have started the day you had your first job. However, don't get discouraged; get on track now.

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About the Author

An LTC News author focusing on long-term care and aging.

LTC News Contributor James Kelly

James Kelly

Contributor since August 21st, 2017

Editor's Note

Most people get Long-Term Care Insurance in their 50s. The younger and healthier you are, the more affordable a policy will be. Delaying will make it more difficult to get coverage and increase the cost.

An LTC policy will ensure you have access to quality care services, including home care. When you have the resources to pay for quality care, your family can concentrate on being family instead of becoming caregivers.

Professional Help to Ensure You Have the Right Plan

There are several top-rated insurance companies that offer long-term care solutions. Each insurance company has its own underwriting standards, and premiums can vary over 100% between insurance companies. LTC Insurance is custom designed. A qualified Long-Term Care Insurance specialist will match you with the best company to save you money. A specialist will put together accurate quotes from all the top companies based on your age, health, family history, and other factors.

Accurate Answers to Your Questions About Long-Term Care Planning

LTC NEWS has many tools and resources. These resources can help you in your research as you prepare for your future retirement and plan for the costs and burdens of aging and declining health.

Parent’s Health Declining? Do They Need Care Now?

Get quality care for your parent or parents if they require it. LTC NEWS can assist. We've put together a few comprehensive guides to help you along the way.

Find help locating quality caregivers or long-term care facilities and get recommendations for a proper care plan, whether a person has a policy. - Filing a Long-Term Care Insurance Claim.

These four guides can be very helpful as you try to find appropriate long-term care services for a loved one:

If your loved one is fortunate enough to have Long-Term Care Insurance, make sure they use it. Families may wait, believing that they can save the benefits for a rainy day. It is not a good idea to put off using available Long-Term Care Insurance benefits.

Today's Reverse Mortgages Can Benefit Older Families

Some people have a large portion of their savings in their homes. With the help of reverse mortgages, you can find ways to pay for quality in-home care, pay for LTC Insurance, and even assist with cash flow during retirement.

Yes, today's reverse mortgages may be the perfect way to pay for a Long-Term Care Insurance policy or even cover the cost of in-home care if you or a loved one is currently in need.

Asking an expert with your questions will help you learn more. Mike Banner, a columnist for LTC NEWS and the host of the television program "62 Who Knew," will respond to your inquiries about long-term care, reverse mortgages, aging, and health.

- Just "Ask Mike." - Reverse Mortgages.

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