Did you know that spending often decreases at retirement? One reason is simply that our habits and desires may change. According to Genworth’s annual Cost of Care Survey, people spend less on transportation, vacations and food as they age. They often spend more on donations and gifts. Health care costs also consume a larger percent of spending as we age. That’s why long-term cost planning is critical. Understanding and planning for long-term needs can help you make the most of your finances today, while providing for your comfort and security down the road.
Unexpected events can also lead to a significant drop in spending. For example, a layoff or health event that causes early retirement can lower lifetime resources and force spending cutbacks.
Planning for expected and unexpected changes in your income and expenses down the road will help you maintain your desired lifestyle. There are many elements that inform such planning, such as:
- Pensions, retirement accounts, other potential future income
- Disability and long-term-care insurance
- Medicare, Medicaid, private insurance
- Projected inflation, rising costs of care
Most people will require some level of support services later in life. About 60 percent of seniors will need a cane, walker or wheelchair to remain mobile, according to the U.S. Health and Retirement Study (an ongoing project of the University of Michigan’s Institute for Social Research). And 20 percent will need help with bathing, eating and dressing. Cognitive decline will require more intensive care.
Knowing the full range of potential costs have been considered as part of your long-term financial plan creates peace-of-mind for you and your loved ones.
Long-term cost planning is part of our Core Client Services. That’s the value of Perspective.