Retirement planning can actually be a lot of fun as you envision what your life will be like after you put your working years behind you. If you like to travel, hike, play golf or tennis, there will be plenty of time for that. For some people, just getting to the point of being able to plan for retirement is at the top of their bucket list.
You have to accumulate a pretty decent nest egg to be able to enjoy all of these activities after your working years. The sooner you get started on a savings plan the better, because it can take an extended period of time to put together the resources that you will need to enjoy retirement to the fullest.
Contributing into the 401(k) plan that may be offered at your place of employment can be an important piece to the puzzle. When you make contributions, you are reducing your taxable income — and thereby improving your short term cash flow. Contributions work this way because you contribute into a 401(k) before you pay taxes. This is a tax advantage available during your working years, and for most people, being fairly aggressive in taking advantage of this can be a wise strategy.
This is an even more important strategy if you are fortunate enough that your employer will match your contributions or match them up to a certain point. This is like an annual raise you control! By all means, say thank you and accept this raise.
My father’s generation worked all their lives to save for retirement, but, at the beginning of that process, they imagined that they would be fortunate to live past 70. The majority of my father’s friends lived to be 80 or older, and my father lived even longer. That generation had the fortune of remarkable market returns which kicked in just when their longer than expected retirement years were occurring. As a result, most of them came out okay. Those of us still working now may not be as fortunate. As an estate planning attorney, I have seen first hand that healthy retirement years can be among the best years of your life if you can afford to retire and still enjoy this stage of life. Plan early, plan often and plan for the long haul. Who knows, you may live to be 90, 100, or even older. This makes taking care of the financial side of planning for your retirement even more crucial.
Of course, one of the risks of living longer is the possibility that you may need living assistance, which can be quite expensive. It is essential to consider this in your planning.
You may not be concerned about long-term care costs because you know that you will qualify for Medicare when you reach the age of 65. However, Medicare does not pay for long-term care, so this is not going to be the solution.
Paying out-of-pocket is always an option, but it will take deep pockets if you decide to go this route. We live in North Carolina. In our state, the median annual cost for a private room in a nursing home is $82,125. When you consider the fact that people often need multiple years of care, you can see that the expenses could be devastating.
Medicaid is a widely embraced solution. This program does pay for long-term care, but you cannot qualify if you have more than $2000 in countable assets. Meeting the financial requirements of qualifying for Medicaid requires careful and knowledgeable planning by someone who not only understands the financial issues, but also the complex program rules.
If you would like to discuss the details with a licensed professional, send me a message through the following page to set up an appointment: Raleigh NC Estate Planning Attorneys.
Mark Costley
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