Financial advisers say their clients are waiting longer to retire, and many people are choosing to retire in stages.
“A trend I am seeing is people phasing into retirement, rather than complete retirement all at once, “ said Patrick Velekei, financial planner at Giles Financial Group in Wyomissing. “I am seeing more people transition to part-time employment before totally retiring, which is a big help financially to the retirement plan and a comfortable transition into retirement.”
A recent survey conducted by the Transamerica Center for Retirement Studies found that 57 percent of workers plan to work past 65, and 54 percent of those polled plan to retire but continue to work at least part-time.
Most said they will stay working for financial reasons. Maintaining health care benefits was the biggest concern for 66 percent of respondents, while three out 10 surveyed are going to keep working for enjoyment.
At Great Scott Financial Services in Bethlehem, owner Scott Seymour found that people retiring have put health care expenses on the front burner. A client nearing retirement will expect to pay $14,000-$20,000 out-of-pocket per year per couple during retirement for health care costs, including insurance premiums.
Seymour said he gives clients a comprehensive look at what expenses will be incurred in retirement. Since health care is a primary concern, Seymour gives clients options on how to manage those expenses.
Some ways to handle health care costs include long-term care insurance, a move to a continuing care facility and getting on Medicaid.
He explained that long-term care insurance policies can be too expensive for most people and living in a continuing care facility is not in most people’s budgets.
“It’s a complicated beast to summarize,” Seymour said. “You have to ask yourself how you go from a working person with health care insurance through your employer and retiring with the knowledge that health care will be a cost to you.”
He added that the uncertainty of Obamacare also is putting stress on his clients.
Sam Marrella, branch manager and co-owner of Marrella Financial Group in Wyomissing, agreed that health care is an unknown variable. One piece of advice that he gives clients is to get a Medicare supplement if they are over 65. He said that age 62 is considered early retirement while 66 is the average age for most going into retirement.
People are living longer, so all of this has to be taken into account, making the issue of retirement more complex.
Carrie Fellon, a certified financial planner who operates Lifestage Financial Solutions LLC in Palmer Township, said that one of the biggest setbacks she sees for people in retirement age is student loan repayment. People are having their children at an older age, which means that at the time they are set to retire they have debt from college-aged children.
In addition, inflation is a “huge enemy,” Marrella said, involving factors such as spikes in energy costs, food expenses and rising school and real estate taxes.
“We recommend people do a comprehensive overview of retirement planning before making a decision to retire,” Marrella said. “If you retire too early, and run out of savings, you will be stuck in that situation.”
According to a report done last year by the Employee Benefits Research Institute, a 65-year-old couple needs $295,000 in savings to cover 75 percent of their Medicare premiums, Medicare supplement premiums and out-of-pocket drug costs after they retirement.
Health care costs aside, Timothy Roof, assistant vice president of Valley National Financial Advisors in Bethlehem, reported that people are greatly concerned with investments and an uncertain market.
“In this low interest-rate environment, clients are having a hard time finding securities,” Roof said. “Some of the best retirement plans are derailed by poor investments.
“People find it difficult to transition from a growth portfolio to retirement. They have to know if they have saved enough to support their spending habits.”