As you are going through life working and paying taxes, you may not concern yourself with retirement planning. After all, you are paying into the Social Security program, so you will have a source of income as a senior citizen. You may also be contributing into the 401(k) plan that your employer offers, so you will have a retirement nest egg accumulated by the time you reach your sixties.
When it comes to health care insurance, you will qualify for Medicare at the age of 65, so you won’t have to worry about medical expenses.
While all of the above can seem accurate on the surface, there are some holes in this reasoning.
Social Security Benefits
Social Security benefits are surprisingly modest. Each person can expect a somewhat different benefit, because your 35 highest earning years are used to determine the amount of your monthly payout.
During the current calendar year, the average monthly benefit for a single retired worker who retired at the age of full eligibility is just over $1,300 per month. For a married couple, the average total benefit is $2,176 per month, assuming both spouses are receiving a benefit.
This kind of money is not going to provide much of a lifestyle anywhere in the country, but this is especially true in our area of northern California. Even if you were to be eligible for the maximum monthly benefit of $2,663, you are not going to be in a position to cross things off your bucket list on this money alone.
The Medicare program will provide a health insurance safety net, but it does not pay for everything in full by any stretch of the imagination. If you have to stay in a hospital, you will be required to pay a significant deductible, and there are high co-payments for particularly long stays.
A monthly premium is required for Medicare Part B. This is the portion of the program that pays for visits to doctors and outpatient treatment. Part D is the prescription drug plan, and there co-payments, deductibles, and premiums that must be paid when you have this coverage.
Your retirement nest egg is just that. You may live for 20 or 30 years after you initially attain senior citizen status. If you start using the money in your account to pay for ongoing expenses as soon as you retire, you could be in a precarious situation at some point in time.
Retirement Planning Consultation
As you can see from these facts, retirement planning is indeed a must if you want to be fully prepared for your elder years. If you take the right steps in advance, you can augment your benefits through your own efforts, and you may be able to truly enjoy your golden years with full freedom and peace of mind.
If you would like to discuss the future with a licensed professional, contact us through this page to set up a consultation: Campbell CA Retirement Planning Attorneys.