If your pension plan does not include these 3 things, make it a new one

Retirement planning is complicated because there are many approximations. It is easy to feel overwhelmed when trying to estimate your life expectancy and basic living expenses, which may lead you to overlook other key factors that affect the amount of money you spend on living. money you will need.

Here are three factors that should definitely be included in your retirement plan. If your current plan does not take them into account, you must make changes.

1. Inflation

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The cost of living increases with time, so is enough to cover your living expenses today will not cover them in 10, or even five years. inflation In your retirement plan, you will almost certainly run out of resources in your last years. "data-reactid =" 14 "> The cost of living is increasing over time, so nothing is enough to cover your living expenses today, in ten or even five years, if you do not have If you consider inflation in your retirement plan, you are likely to run out of money in your last years.

Source of the image: Getty Images.

Inflation, like most factors that influence your retirement, is impossible to predict accurately. The best we can do is look at historical data and make informed assumptions about the future. The classic wisdom is to assume an inflation rate of 3% per year.

So, if your living expenses rise to $ 40,000 this year, do you anticipate that they will rise to $ 41,200 the following year, to $ 42,436 the following year? next year, etc. However, this is just an estimate. If you want to be on the safe side, consider using an annual inflation rate of 4% instead of adding an extra cushion. Many retirement calculators already take into account inflation or allow you to establish an estimated inflation rate. You do not have to do all this calculation yourself for every year of your retirement.

2. Health expenses

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "A 65-year-old retires in 2018 about 285 $ 000 to cover their health expenses in retirement, according to Fidelityand some sources are even higher. HealthView Services estimates that a 65-year-old couple who is retiring today would need $ 363,000 to cover retirement health expenses. These figures do not include some expenses, such as long-term care or dental care. If you need these services, expect an even bigger increase in your health care costs. "Data-reactid =" 30 "> A 65-year-old couple retiring in 2018 will need about $ 285,000 to cover her retirement health expenses, according to Fidelity HealthView Services estimates that a couple The 65-year-old who is retiring today would need $ 363,000 to cover his retirement health expenses, not to mention some expenses, such as long-term care or dental care. these services, expect your health care costs to increase further.

Medicare will cover some of your retirement health expenses, but there are still some deductibles, premiums and coinsurance to pay out of pocket. In addition, there are things that are not covered at all, such as dental care, long-term care and hearing aids. You will need to find a way to cover these costs yourself or take out additional insurance to fill the gaps in coverage.

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "If you have not planned the cost of Consider increasing your pension contributions to reflect the extra money you will need to fund your health care expenses. Health Savings Account (HSA) if your health insurance is a high deductible health plan (HDHP). Contributions to these accounts reduce your taxable income this year, they never expire and the money is tax free when you use it for eligible health expenses. Those who believe that they may be in need of long-term care should consider buying one. long term care insurance politics as well. And of course, you must prioritize your health at any age to reduce your health care expenses. "Data-reactid =" 32 "> If you have not planned the cost of health care in retirement, now is the time to increase your retirement.You can also open a health savings account if your insurance is a high-deductible health plan (HDHP) Contributions to these accounts reduce your taxable income, they never expire, and the funds are tax-free when you use them for eligible health expenses. People who think they may need long-term care should also consider taking out long-term care insurance – of course, you need to prioritize your health at any age to reduce your health costs.

3. taxes

Unless you have all your retirement savings in Roth accounts, you will have to pay taxes in retirement. If you have not planned to pay tax on your retirement income, you could exhaust your retirement savings faster than expected. But you can not know how the tax brackets will change or how much you will need to cover your living expenses each year.

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