Retirement Planning Is Changing in 2022 — Here Are 9 Reasons Why

Retirement planning is one of the most important ways that you can prepare for life after work. However, the retirement planning strategies of yesteryear may not provide the financial security necessary to allow you to enjoy your golden years.

It is still possible to effectively plan for life after work. But first, it is essential to understand why retirement planning is changing in the first place. Below, I have outlined 9 factors that are shaping retirement planning in 2022.

1. Frequent Job Changes Are Common

As evidenced by the Great Resignation, the modern generation of workers are more willing to seek new employment elsewhere in pursuit of better pay and/or benefits. You may have even experienced this shift firsthand. If so, then you know that each job change may require you to move your 401K or other retirement savings account.

2. There Are More Assets to Consider

Modern technologies have made it much easier to invest in self-directed assets, such as IRAs. While having additional investment options can be very beneficial to you in the long run, navigating all these choices can make retirement planning a bit more complex.

3. People Are Working Longer

People are working longer on average. This extended work-life often occurs because they underestimate how much money they will need to retire.

When you're planning out your own retirement, set a target number so that you can determine how long you will need to work to reach your goal. Generally, your target amount should allow you to live on 3% or less in withdrawals from your retirement account each year.

4. Pensions Are Becoming Scarce

Unfortunately, traditional pensions are quickly becoming a thing of the past. Instead, many businesses are offering defined contribution plans (like 401k’s). This setup means that you will need to use other retirement accounts such as IRAs in order to save for life after work.

5. Inflation Continues to Rise

In the coming years, inflation spikes will occur more frequently due to the size and scope of government debt. This slow decay means that your money will have less purchasing power over time. In order to combat this issue, I recommend saving and investing more money than you think you will need.

6. Health Costs Are Increasing

Your retirement planning should include investing in a HSA (Health Savings Account). These funds will help you cover rising healthcare costs as you age. If you plan on retiring before you are eligible for Medicare, then plan on setting aside additional funds to cover costs associated with seeking a private health insurance policy.

7. Retirees Are Living Longer

Traditional retirement planning strategies are based on the projected lifespans of past generations. The chances are that people in the workforce now will outlive previous generations due to advancements in medical care, which means that your savings must last longer as well.

8. Traditional Assets Are Less Productive

For decades, CDs and bonds were the gold standards when it came to supplementing 401Ks or other retirement savings accounts. However, CDs and bonds are both generating far less income than ever before due to historically low interest rates.

Therefore, you simply cannot rely on these assets to significantly bolster your retirement savings accounts.

In order to supplement your 401K, you will need to explore other assets, such as the self-directed IRAs that can be invested in Fixed Index Annuities which allow for principal protection and a reasonable rate of growth, historically 6-8%). When doing so, be careful to balance the risk and reward of each investment opportunity.

9. Politics

The final factor that is impacting retirement planning is politics. Congress routinely alters laws that can affect how you manage your retirement. This alteration has become increasingly common in recent years, as the current legislative environment is more volatile than ever.

You should keep a close eye on current developments and any impending legislation so that you can take appropriate action to protect your retirement savings.

All of these nine reasons combined mean that it’s more important than ever, regardless of your age, to be paying serious attention to what your retirement strategy is and shoring up any of the areas that need better protection.

Ty J. Young is the CEO of Ty J. Young Wealth Management, one of the leading retirement advisory firms in the US.

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