Retirement + Aging Series

Retirement and Money - 5 Things You Need To Know

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The financial realities of retiring

Retirement isn't what it used to be. Decades ago, people retired at 65 and could expect to live another 20 years or so in their golden years. But the average life expectancy for Americans has increased in recent decades—it's now around 80 for women and 76 for men—and many Americans are working well past their 65th birthday because they can't afford not to. The financial realities of retirement have changed dramatically over the last 50 years, and if you're not prepared, you could be in trouble when you stop working full-time. Luckily, there are ways to ensure that your golden years won't end up tarnished. This guide will help demystify some common misconceptions about retirement planning so you can prepare yourself. 

Social Security and Retirement

The Social Security Administration (SSA) estimates that in 2018, the average retiree will receive $1,404 per month from Social Security—but this number doesn't factor in inflation or other expenses as it does now when retirees were younger. According to an SSA spokesperson: "The estimated average benefit for current beneficiaries is around $16,000 per year." Considering that most people need more than $16K per year simply to pay their bills and buy groceries, this doesn't sound very promising! So if your goal is to save up enough money before retirement so that no matter what happens with inflation or medical costs or any other unexpected expenses (like buying a new car), then saving up some extra funds is  necessary!

Seniors are increasingly falling into poverty.

The number of seniors living in poverty has been increasing. According to the National Council on Ageing, "the number of individuals aged 65 and older living in poverty increased from 1.9 million in 1967 to 3.5 million in 2017." This trend is expected to continue over the next decade or so, as more people live longer and retire with lower savings and income than ever before.

It's never too late to start saving for retirement

The earlier you start saving for retirement, the better, because as time goes on your savings will have less of an impact on your future financial security.The reason is simple: compound interest. Compound interest is essentially interest that builds upon itself over time; simply put, if your money earns 5% each year (the average return for stocks), it'll double in value after 20 years (5% x 2 = 10; 10 x 2 = 20). This means that if someone invested $10 000 at age 25 at 5% per year, they'd have $25 000 by age 50—and this assumes no changes in the value of their investment! By contrast, if they waited until 45 years old to invest that same amount of money at 5%, they'd only have $18 500 by age 50 due to lost opportunities and higher inflation rates later on in life. It may seem like a small difference now because both investments would result in roughly similar final values (depending on when exactly each person starts saving), but compounded over decades and even centuries of time? The numbers add up quickly!

Conclusion

If you're already retired, there are steps you can take to make sure you stay on track. If you plan to retire soon or have kids who will be entering their senior years in the next decade, start saving now so that they will have enough money for their own retirements. And if you're part of the generation that's about to reach retirement age, don't let others' mistakes keep them from being able to enjoy their golden years.