As 2021 has been marked by both health and economic challenges, those planning for their retirement in 2022 will face many obstacles to consider. One of these is the potential retirement savings gap, while others are the effects of inflation and having enough knowledge to make good investment decisions. To be well-prepared, it is important to be aware of the 2022 retirement investment trends and potential roadblocks to success.
1. Retirement Longevity Is Evolving
Despite the decrease in life expectancy due to the pandemic, the length of retirement for the majority of Americans is still increasing. It is estimated that one in five 65-year-old men and 35 percent of women who are 65 will reach 90 years old. While this is an amazing feat, it can also leave many retirees ill-prepared for the extended period of retirement. To be adequately prepared, it is necessary to plan and save for more years of retirement than just 10 or 20.
2. Retiree Healthcare Expenses Continue to Grow
Retirement planning requires budgeting for many expenses, but healthcare costs are the largest. Medicare coverage is available, but it is not comprehensive and can be expensive. In 2019, the average out-of-pocket expense for households with Medicare was over $6,800, meaning a minimum of $68,000 is necessary for 10 years of medical expenses. For longer retirements, the amount needed can be significantly greater, as healthcare costs can account for up to 13 percent of a senior’s total expenditures.
3. Most Retirees Don’t Remain Employed
Over 60 percent of people intend to remain employed even after they retire from their full-time positions. However, the reality is that only 15 percent of retirees actually do so. This can be due to health or physical limitations, making it difficult to find employment that fits their needs. Even so, part-time work can help retirees avoid Social Security payments and conserve their retirement funds. Nevertheless, retirees should plan with the understanding that post-retirement employment may not be achievable.
4. Alternative Investments Take Up More Space in Retirement Portfolios
Retirement portfolios have traditionally been composed of cash investments, stocks, and bonds, but now alternative investments are becoming increasingly popular. With technology making it easier to invest in assets outside of traditional markets, many people are choosing to incorporate alternative investments into their retirement plans. These alternative investments can include real estate, cryptocurrency, luxury goods, and venture capital, and may even make up the majority of a portfolio. Thus, alternative assets are becoming an essential part of retirement plans.
5. Counteract Inflation
As the cost of food and goods continues to go up, the effects of inflation have the potential to lower returns on retirement savings investments. To counteract this, experts suggest that individuals should focus on saving more and/or working longer. Even when returns are down, it is important to remain invested in the long-term, as historically markets have recovered from lows and returned to highs. Therefore, it is best to ride out the wave of market fluctuations rather than panicking and withdrawing funds.
6. Increase Your Financial Knowledge
By actively managing your investments, you can ride the wave of the market and take advantage of potential highs. To do this, you should stay informed of changes in the market and analyze investor data. This will help you make decisions and pivot to improve your financial outlook. If you are close to retirement, however, it is important to reduce the gap in your savings and focus on living off less retirement income each month. This way, you can still ride the wave of the market and make smart decisions with your money.
Keeping an Eye on the Trends Stabilizes Your Financial Future
It is essential to keep up with the ever-changing retirement trends in order to secure a stable financial future. This is especially true when considering factors such as longevity and medical expense inflation, which can have a significant impact on the duration of a retirement fund. Therefore, it is important to consult a retirement planner and regularly reassess your plan to ensure that it is still suitable for your future needs. By doing so, you can ensure that your retirement remains on the right track.