While Americans are struggling to save Opens a New Window. , they are also living longer lives, which can put a big strain on retirement Opens a New Window. savings.
On average, about half of Americans are on track to experience a potential shortfall covering essential expenses in retirement, according to Fidelity Investments.
A new report from the World Economic Forum found that, in the U.S., the average 65-year-old has enough saved to cover about 9.7 years of retirement – not including Social Security and other government programs.
But with some planning, workers can’t get on the right track to live comfortably throughout retirement.
One way to boost savings accounts, according to Keith Bernhardt, vice president of retirement income at Fidelity Investments, is to stash away 15 percent of income during any given year.
Here are some other tips to manage risks workers might encounter during retirement, according to Bernhardt.
Be prepared for health care expenses
Health care is the “biggest unknown from an expense perspective,” Bernhardt told FOX Business.
While people may have a sense of what they tend to spend on things like transportation and utilities, what they will eventually spend on health care is uncertain, Bernhardt noted.
There is always the possibility that a serious health condition will occur.
Additionally, people are often uncertain about what will be covered when they switch to Medicare and what long-term care will cost, if needed.
Fidelity Investments estimates that the average couple retiring in 2019 will need $285,000 to cover health care costs in retirement. However, some people may live longer and need even more money.
Plan to live longer
Americans are living longer – in some cases into their 80s and 90s. For a person retiring at 65, that could mean they will need twenty to thirty years’ worth of retirement savings.
And while Bernhardt noted that Social Security should be an important part of an overall retirement plan, it is typically not enough for the average person to live on.
However, one can boost benefits by delaying when you claim Social Security. That is “one of the most powerful things people can do,” Bernhardt said. Each year you delay will increase the payout by 8 percent on an annual basis.
Plan for inflation
When investing for retirement, Fidelity said it is wise to consider some growth-oriented assets that will keep pace with the rising cost of living.
While having too much risk in your portfolio in not recommended, adding things like stocks, mutual funds, Treasury inflation-protected securities, real estate securities and commodities could be beneficial as part of a diversified strategy.
Social Security implements cost of living increases, though some groups have argued they are not sufficient to cover rising expenses.
Protect your savings
“In general, people try to protect their savings,” Bernhardt said.
And that is a good strategy. Tapping savings too quickly could put your later years of retirement in jeopardy.
Fidelity Investments recommends withdrawing no more than 4 percent to 5 percent from your personal savings in the first year of retirement, and then adjusting that amount for inflation over the coming years.
