Broker Check

Do Not Let Your Retirement Income Take a 'HIT'!

June 14, 2022

What would happen if your retirement income were to take a HIT?  The acronym HIT refers to healthcare costs, inflation, and taxes.  These may have a major impact on your retirement income.

As you save and then approach retirement, your income plan will generate the income stream necessary to pay for your housing and food costs, healthcare, and other expenses like entertainment and travel.  You can rely on that income year after year.  However, it could possibly not last as long as planned.

Healthcare costs continue to rise.  Estimates show that over the last 10 years, they have risen by more than 65%.  This includes hospital and facility costs, health provider costs, prescriptions, and insurance premiums.  Based on various projections, these will increase even more in the coming years. Additionally, there is the increase in the costs of long-term care health.  These include home healthcare, assisted living, and nursing home care.

Today, everyone is aware of inflation.   Over the last 20 years, the average annual inflation rate was 3.10%.  That does not seem like an issue until we realize at that rate, prices will double about every 20 years.   An income amount from 20 years ago only equals approximately one-half of that amount today.  There is also the hidden inflation cost. For example, the cereal box costs the same but is only one-half full.  Many consider inflation as a stealth (hidden) tax.

Taxes are another important issue to consider.  Where do you see income tax rates going in the future?  Several issues point to an increase. Tax rates are historically low right now.  There could also be future limits on your tax deductions.  Additionally, state and local tax increases could also occur.

You cannot know precisely how much total income you will need in retirement. Even if you are starting with a substantial retirement income, these three HIT risks and their unpredictable costs could quickly chip away at your purchasing power and lower your standard of living.  Your plan should consider and address these risks.  Having resources to combat them may be necessary.

Our Playbook Pro Method can help you plan for your retirement income, addressing these and other risks.  Contact me to start your planning.  Whether you are saving and climbing up the mountain, approaching the top of the mountain and trying to determine what your retirement income will be, or descending the mountain for a planned long retirement, we can help you.