While $1 million is sometimes cited as the ideal number for retirement savings, this assumes a one-size-fits-all approach to retirement planning. Everyone’s retirement goals are unique, and preparing for retirement might not be as simple as saving a certain amount at all. It’s worth taking a more in-depth look at your finances and future needs to see if you have enough saved for retirement and what retirement costs to factor into your plan.

Longevity Risk

After saving for many years, you will finally start to draw down those savings to fund retirement and must make them last for the rest of your life. This is difficult considering that we’re living longer than ever and often want to maintain our pre-retirement lifestyle in retirement. However, there are options for protecting against longevity risk. Pension or no pension, have a plan for creating retirement income for life. This plan can include a reliable income source that isn’t affected by market drops and continues to pay out for as long as you live. There are also options that continue to pay out for the rest of a spouse’s life after the first spouse’s passing. These insurance products can be subject to restrictions, surrender charges, holding periods, or early withdrawal fees which vary by carrier, so you will want to speak with a professional to see what options may fit your situation.

Factor in Inflation

Have you factored inflation into your retirement plan? Let’s say you start retirement with a $1 million nest egg. You know what $1 million is worth now, but what about in 20 years? After 20 years with a 2% inflation rate (the Fed’s “target” interest rate), $1,000,000 would have the buying power of only $672,971.[1] Inflation erodes the value of savings and will continue to do so after you retire. The Fed said that “inflation has risen, largely reflecting transitory factors”[2] and seemed unconcerned about the potential for higher inflation and the fact that March consumer prices rose 2.6%.[3]

Potential for Long-Term Care Costs

An average 65-year-old couple retiring today will need an estimated $295,000 to cover their healthcare costs[4], and that doesn’t even include long-term care costs. Between rising healthcare costs and the fact that an estimated 70% of today’s 65-year-olds will need long-term care at some point[5], overall costs could be much higher. Long-term care costs can be staggering, and Medicare doesn’t necessarily cover them. In 2021, the median yearly cost for an in-home health aide was $54,912, and the median yearly cost for a private room in a nursing home was $105,850.[6]

We will work with you to create a comprehensive retirement plan that takes all retirement costs into account. Sign up for a no-cost, no-obligation financial review to take the first steps towards a retirement plan that’s more than just a number.


[1] https://www.buyupside.com/calculators/inflationjan08.htm

[2] https://www.federalreserve.gov/newsevents/pressreleases/monetary20210428a.htm

[3] https://www.cnbc.com/2021/04/13/us-consumer-price-index-march-2021.html

[4] https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

[5] https://acl.gov/ltc/the-basics/how-much-care-will-you-need.html

[6] https://www.medicareresources.org/faqs/to-what-extent-will-medicare-cover-long-term-care/

Solutions First Financial Group is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Solutions First Financial Group are not affiliated companies. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to guarantees or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. Solutions First Financial Group is not affiliated with the U.S. government or any governmental agency. CA Insurance Lic. #0H38616.  916965 – 5/21