There’s no nice way to say it. But many baby boomers are going to have a tough time in retirement. If they can retire at all.
Why do I say that?
I just read a few statistics about baby boomers and their retirement. And it wasn’t good news.
Here’s some of what I found:
78% of people age 50+ are behind on saving for retirement.
And on top of that… 24% of baby boomers have no retirement savings at all.
Many pre-retirees and retirees have no savings. Because they’re banking on Social Security alone to fund their retirement.
Let me tell you why that’s a bad idea…
There’s this little thing called inflation. And it will erode your retirement funds quicker than almost anything. Yes, you will get cost of living adjustments (COLA) for Social Security. But it may not be enough to offset the increases in cost of living from inflation.
More specifically… your health care costs.
Each year Social Security payments may get a cost of living (COLA) adjustment. This is to keep up with rising prices (inflation).
The government bases that COLA adjustment on the consumer price index. It’s a basket that reflects overall price increases.
The problem is, health care costs are rising faster than overall prices.
Many retirees underestimate how much health care costs will impact their Social Security.
According to a Nationwide study, retirees could spend up to 64% of their social security benefit on health care costs alone.
That doesn’t leave much left over. It will be hard to live on 36% of your Social Security benefit… even if you qualify for the maximum benefit.
You need to factor in health care costs when planning your retirement. Costs have been increasing year after year… with no sign of slowing down. But there are ways to ease the pain of health care cost increases.
These can include..
- Increasing savings to cover health care costs
- Utilizing an Health Savings Account (HSA) to save money
- Working longer into your retirement years
Planning your retirement can seem daunting. You have so many options to consider. Health care costs are just one piece of the retirement puzzle. But you can set yourself up so you don’t get blindsided by rising health care costs.
And if Social Security is your only plan for retirement… you should consider other options so you can live more comfortably. There’s lots of ways to build your retirement savings. That way, you don’t rely solely on Social Security.