Retirement Planning

One important issue in retirement planning is the gender and marital status of an individual. Women tend to have a higher life expectancy than men, and married couples should consider the increased likelihood of shortfall for women— due not only to increased life expectancy but also because one or more of a couple’s retirement resources will be lost with the passing of a spouse, which may place an even greater importance on investments after this point.

Another source of concern is that women may have lower risk tolerance than men. While this difference is still under dispute, it has important implications for women preparing for retirement. Women may tend to be too conservative in their investing, and they therefore are less likely to be invested in stocks. Financial planners should be certain to spend time explaining the ideas behind the strategy of investing in stocks for the long run.

Historically married women have been able to rely on a husband’s savings, even when their own employers have offered defined contribution plans. However, given the increased likelihood of divorce today, women should be certain that they are contributing to assets in their own name and are part of the decision-making process. Then, should they find themselves on their own, they will not only have begun accumulation of their own resources, but will know why those decisions were made and will be able to participate in future investment choices.

Another important issue is the consideration of health concerns. While one may accumulate a significant amount of wealth prior to retirement, this wealth could easily be diminished because of illness. Medicare is generally not available until one is sixty-five years of age, and anyone retiring prior to this age should therefore make arrangements for some protection. However, Medicare is not all-inclusive and currently does not provide for nonhospital prescriptions or long-term care needs beyond 120 days. Therefore any long-term illness could quickly use up any personal savings. The financial effect of such an illness can be mitigated through the use of private insurance plans. This may include continued participation in private health insurance plans through a previous employer. However, a more common trend has been for households to acquire long-term care insurance. These plans can typically be purchased for five different levels of coverage, including skilled nursing care, intermediate nursing care, custodial care, home care, and adult day care. These policies can be quite costly, but lower rates may be attainable for those who elect to enroll at younger ages, such as in their mid-fifties. Despite their cost, these plans may prevent the diminishing of an otherwise sufficient investment portfolio.

Overall the key elements to a retirement plan include choosing a retirement age and level of living, making investment choices, and assuring proper health care coverage. Taking advantage of time and investing principles can lead to higher levels of accumulated savings by retirement, and thus a higher level of living in retirement.