What you are forgetting about retirement
In Work. Retire. Repeat., Teresa Ghilarducci calls America’s retirement system a failed experiment. Meanwhile, Ted Siedle warns of the ‘Greatest Retirement Crisis in American History’ in Forbes. Here’s what you’re missing in your retirement plan.
America’s failed experiment
Among many financial problems, America is amid a retirement crisis not seen since the fall of modern-day Greece, which we suppose wasn’t all that long ago. Studies show that half of all Americans today retire with $25,000 or less in their retirement accounts. While that’s scary enough, it’s not as frightening as the retirement of generations to follow Baby Boomers, whom many financial advisors advise not to plan on Social Security for supplemental income in their golden pond years.
Because of this retirement crisis, there is a plethora of retirement planning advice from a plethora of financial talking heads available online, in books, and from financial services firms. Therefore, the two of us rubbed our heads together, like Dan Akroyd and Jane Curtin, to think of unique retirement considerations that most Americans fail to consider.
The top WTF about retirement planning
1. Family needs in retirement
When we say there are many financial problems Americans face today, unfortunately, this isn’t a joke. Teens can’t find summer jobs, and that, as studies suggest, will affect their maximum lifetime earning potential. Post-college millennials have postponed significant life events such as starting a family, buying a home, and funding a retirement account.
Generation Y is the first generation to be confused about why their every accomplishment doesn’t garner a trophy. They don’t earn nearly as much as expected or need to make ends meet.
What retirement savings Generation X had were hit hard by the financial crisis and their participation in the McMansion Monopoly. Never one to practice moderation, we needed the best house and kids in the most after-school activities to be driven to and from in the best cars when they weren’t on the best vacations. All this was at the expense of their best retirement interest.
Because we understand familial love sometimes goes against Mom and Dad’s best interest, we know many in or nearing retirement will spend some of their retirement savings taking care of their children and grandchildren. This is not a plea for you to care for your adult children. This is a plea to take care of yourself if you even think there’s a chance you may help take care of your adult children financially.
Plan accordingly if you think you may fall prone to such financial responsibility.
1. Open a specialized trust account for family members.
In the trust documents, include parameters for your children or grandchildren to receive money from this trust, such as long-term unemployment or other financial emergencies. This eliminates the risk of them requesting loans at their whim.
2. Open a 529 Plan for each of your grandchildren.
You can find all of the benefits here, but this type of account mainly provides financial support for education.
3. Open a UTMA/UGMA account for each of your grandchildren.
All of the benefits of doing so can be found here. Remember, once your grandchild(ren) reaches the age of majority in their state of residence, the money in such an account is 100% theirs.
4. Open a gift account from which you pay family members at your whim.
This is simply a savings or investment account in which you store money you may want to give to family members. Remember to stay under annual gifting limits to avoid taxes. Ultimately, such a plan allows you to plan for the inevitable if you’re the gay child or guncle who’s likely to sacrifice for your heirs.
2. Housing in retirement
I recently attended a webinar that tackled one of the sneaky little retirement details many overlook—housing. Sure, financial advisors love to plan for bucket list adventures and those “golden years” of sipping piña coladas on a beach. But what happens when the knees start creaking, and a beach house becomes a slip-and-fall hazard? That part often gets glossed over.
According to a study by Johns Hopkins University School of Nursing and Legg Mason, the majority of folks over 65 still live at home, with a whopping 97% staying put in traditional communities until they’re 75-84, at which point the transition to senior living, or long-term care kicks into high gear. But here’s the catch: most financial plans aren’t prepared for that moment when staircases morph into mountains, or bathrooms become obstacle courses.
With the growing number of seniors in the U.S., housing options are almost as varied as car models—everything from your basic compact (aging-in-place with a few grab bars) to the Cadillac of care (think plush assisted living facilities). This isn’t just about saving for your dream home; it’s about ensuring your future self won’t live in a maze of tripping hazards.
Talking through long-term care and housing needs might sound about as thrilling as discussing insurance premiums, but it’s essential. Bringing it into the financial plan doesn’t just mean budgeting for some extra line items. It means sparing your loved ones from deciding between putting you in a place with bingo nights or the spa bathrooms. Planning now is a gift to your future self and your family—because nothing says “I love you” quite like not turning your life into a sudden game of ‘Guess What Mom Wants.’
3. Medical travel in retirement
Nowadays, healthcare is a must-have in any solid retirement plan, but most people aren’t precisely booking flights for major surgeries. However, traveling abroad for healthcare—medical tourism—is skyrocketing in popularity, and for good reason. It’s not just for people looking to save a few bucks on dental work. With the high cost of healthcare in the U.S. (think: an average of $24,000 for a hip replacement), it’s no wonder Americans are looking overseas for options.
Countries like Mexico, Thailand, and Turkey are at the top of the list for procedures ranging from cosmetic to major medical surgeries. Why? The costs can be up to 70% lower! For instance, that same hip replacement can cost just $11,000 in Mexico, including surgery and recovery, per Healthcare.com.
Moreover, many international hospitals have top-notch facilities and U.S.-trained doctors, making the experience far less nerve-wracking than it used to be.
Medical tourism is a $38.5 billion industry, expected to grow by 15-20% annually, according to Healthcare.com. But it’s not just about saving money. Some retirees seek treatments that aren’t available in the U.S. at all, like specific cancer therapies offered in Turkey or gender affirmation surgeries in India, per myshortlister.com, a medical tourism website.
Adding international healthcare options to your retirement plan could be a smart move. However, budget for travel, accommodation, and aftercare since these are often out-of-pocket expenses not covered by U.S. insurance. Think of it as combining healthcare and vacation with less sightseeing and a little more anesthesia.
What you’re forgetting about in retirement conclusion
Retirement and the need for a solid plan are ever-changing, and so must your strategy. What worked a decade ago won’t cut it today. Between shifting laws, ballooning healthcare costs, and the increasing trend of retirees booking flights to Mexico for hip replacements, the retirement landscape looks like a game of Whack-a-Mole.
Retirement planning isn’t just about stockpiling savings anymore. It’s about thinking creatively and being strategic. Here are three unique considerations to help you stay ahead:
1. Plan for healthcare costs… and where you might pay for them
It’s no secret that healthcare in the U.S. is costly. A recent survey found that 65% of Americans have delayed or skipped medical care due to cost concerns. But here’s a twist: more retirees opt for medical tourism to access quality care at a fraction of U.S. prices. Need a hip replacement? Instead of $24,000 in the U.S., you could get it done for $11,000 in Mexico. Planning for retirement healthcare now involves considering where you might receive care and if a “medical vacation” is worth the passport stamp.
2. Expect family dynamics to impact your finances
Once upon a time, retirees could save for themselves and maybe a couple of family get-togethers. Today, many retirees are finding that the needs of adult children and grandchildren are chipping away at their nest egg. Whether it’s helping with student loans or a surprise bill, around 20% of retirees provide regular financial assistance to family members. If you think you might cover more than your Netflix subscription, budget for it.
3. Don’t just save—diversify for new realities
Ten years ago, you might have thought, “I’ll just live off my Social Security and a solid 401(k).” But the traditional retirement fund isn’t as rock-solid as it used to be, thanks to increasing healthcare costs and a longer life expectancy (yay for living longer… but at what cost?). Consider diversifying into real estate, side hustles, or even launching a part-time business like a vending machine gig. It’s a creative way to add income streams while keeping you engaged in your golden years.
Your retirement needs to be as dynamic and flexible as a Cirque du Soleil performer. Think creatively, plan strategically, and don’t hesitate to toss in a little international flavor. After all, why pay top dollar for medical care here when you can recover in a beach town south of the border?
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