Planning For Retirement? Panic vs. Prep

After recently reading an article It’s Never Too Late to Start Planning Your Retirementby Tom Lauricella from the Sunday, May 26 edition of the Wall Street Journal, it motivated me to re-evaluate my own retirement savings. The article chronicles very briefly what you should be doing for retirement at each decade starting in your 20s up to your 60s and beyond. It’s a fairly benign article that at least gets gives you some benchmarks for your retirement planning. This led me to research some other articles that gave more detail and specified “aggressive” amounts that financial experts suggest you have squirreled away each decade until retirement. This additional reading then led me to some massive indigestion. It really has me rethinking my retirement strategies. What I thought was a healthy sum is not so.

The “Bad and Ugly”
After a roll of antacids, I decided to poll number of friends, peers and co-workers to see what their feelings were on this topic. I asked at what age they thought they should truly start planning for their retirement, when they actually started to save, and how much they felt they need to have saved when that day comes. Somewhat predictably, I found many co-workers and peers, which just so happen to work in the senior care industry, had different answers from those who work outside the industry on when you should start. My very unscientific results showed that those who work in the industry typically answered that you should start saving and planning in your early 20s or starting with your very first job! Basically they felt as soon as you had a job that offered benefits like tax sheltered annuities (TSAs) and individual retirement accounts (IRAs) you should start saving. While those outside the senior care industry on average answered slightly later to start. Our exposure to the retirement industry, I feel, gives us more foresight and a better grasp on the cost of care, so we tend to embrace the idea of saving sooner. However, it didn’t necessarily translate into those respondents actually starting any earlier. I think in some cases it was more about hindsight. Now the amount needed to retire comfortably was kind of all over the place for both groups; ranging from about $500,000 to my personal favorite “one beeeellllliion dollars” (a la Dr. Evil from the Austin Powers movies). One reason for these different answers is the age range of respondents in relation to inflation. For those of us 25+ years from retirement, one beeeellllliion dollars may not be too farfetched, ok maybe a little.

According to the 2013 Cost of Care Survey done by Genworth Financial, the average annual cost of a semi-private room in a nursing home in Pennsylvania is $94,619. They then compound that cost by 5%, which represents the annual growth rate based on the survey. If my CFO’s math is correct, in 35 years at age 74, I could end up paying $529,919 for one year of nursing care! Even if you compound the cost at 4% that would still be $373,375/year and a “bargain” at $266,245/year compounding for 3%. You could then multiply that by 2.2 years, which is the national average length of stay in a nursing home in 2012, according to the government’s latest National Nursing Home Survey. Stomach churning yet? Let’s not forget about other medical bills like healthcare premiums and co-pays or potential needs like home care or a personal care home. And who knows what Medicare and Social Security will look like then. Now you may appreciate my indigestion.

The “Good”
Lets also look at the bright side. Relatively speaking our earning potential will also compound and inflate at similar rates and hopefully so will our return on our investments. This blog is not a scare tactic or a suggestion that it’s a time to panic. It’s simply a prompt for you to think more clearly about saving for retirement. Plus, after my own personal panic attack, more Tums®, and a good night’s sleep, my anxiety subsided a bit. I realized it’s never too late to start, but also it’s never too late to restart. We need to better prepare and not panic about retirement savings and reevaluate TSA and IRA contributions and buckle down on spending less and diversely saving more. Also it may be a good time to talk things over with your advisor or broker. I’m sure he or she misses you greatly.

Here at Messiah Lifeways, we strive to change the conversation about aging, but we also like to start conversations about aging, even if it might be rather scary in certain cases. Also I would like to thank everyone who participated in my “very unscientific poll.” After collecting many of the responses, I began to think and hope that maybe after being asked these questions and then reading this blog, you won’t be blindsided and thus be better prepared when it comes to retirement. And hopefully when that time comes, we can say, “I saw this coming” and we can all rest a little easier.

Check out some of the good, the bad, and the ugly links:

Tips for Planning Your Retirement

7 Tips for Saving for Retirement with a Late Start

Ultimate Guide to Retirement

Seniors in 48 States Face Serious Income Shortage

How much should you have saved for retirement so far by age?

Retirement Planning, Decade by Decade

How Much Do I Need to Retire? 

Matthew J. Gallardo

Matthew J. Gallardo

Matt is the Director of Community Engagement and Coaching at Messiah Lifeways. He brings nearly 20 years of experience in counseling, advocating, and guiding older adults and caregivers through many of life’s tough decisions. His diverse background of working in hospital and rehabilitation settings, community services, and senior housing gives him the breadth and depth of knowledge to provide unique solutions, opportunities, and help individuals proactively plan for the future. He serves as the Lifeways Coach and as a writer, blogger, podcaster, and speaker for Messiah Lifeways, located in Mechanicsburg, PA.

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