Saving for retirement is important. If you start saving early, save consistently, and monitor your investments, you're likely to have accumulated significant savings for your retirement years. But does that mean you'll have enough? There are five factors that can seriously impact how much you have available for your retirement years. Four you might already know - one might surprise you! These factors are:

1. Inflation: When your dollar buys less today than it did last year, inflation is the culprit. The historical average rate of inflation is 3%. That means that your $100 today will only buy $50 worth of goods in 23 years. If the rate is 4%, it only takes 18 years to reach the $50 level. So, inflation is a real factor when it comes to retirement savings and the income needed in retirement. If $50,000 meets your needs today, in 10 years, you'll need $67,195 to equal today's purchasing power. Inflation can seriously erode your retirement savings because you'll need more money each year to maintain the same standard of living. Make sure your retirement plan includes a strategy to grow your investments in retirement.
2. Investment Risk: The amount of return you get on your investments corresponds to the amount of risk you’re willing to take in the market. Low risk investments provide lower returns and higher risk investments usually provide higher returns. When you are younger, you can afford to hold higher risk investments because you have more time to recoup losses if the market drops. As people approach retirement age, they often move all their holdings to more conservative investments. But, we have to remember that retirement can be expected to span 20 or 30 years. So, in order to keep pace with inflation and grow those assets to last your full retirement, consider a mix of lower and higher risk investments during your retirement years.
3. Healthcare & Long-Term Care Expenses: Once you retire, you’ll likely face increased costs for medical insurance coverage and out-of-pocket expenses, even with Medicare and Medigap. In addition, long-term care may be needed if physical or mental disabilities impact you or your spouse’s ability to manage everyday activities. Long-term care is expensive and the cost is growing at a rate faster than inflation. With people living longer, the likelihood of needing long-term care increases. Planning for your medical expenses and long-term care insurance need to be considered as you plan you retirement budget.
4. Taxes: It is important to understand how your investments are taxed so they don’t eat away at your income in retirement. Taxes can impact your retirement income and savings, especially if your income comes from traditional IRAs, 401(k)s, or 403(b)s, which are all subject to income taxes. Some income, such as interest income, is taxed at ordinary income tax rates, while other investment income is exempt from taxes or has reduced tax rates. Understanding your tax consequences is important when projecting for your retirement income.
5. You: This is the hardest one to predict! One of the greatest barriers to having enough for retirement is our attitude about the funds we have set aside for retirement. Too many times, people see those funds as available for expenses, debt, and emergencies. Now, to be fair, there are emergency situations where accessing the funds makes sense, but too often, people take withdrawals and loans for non-emergency expenses. If you see those funds as available today, you're really shooting yourself in the retirement foot. Even a loan removes those funds from the earning capacity for your retirement. And, if you're earning 8% on your investments, but only paying yourself 5% on the loan, you're still losing 3%! The wisest attitude is to see your retirement savings as not available until you retire. Let them grow and work for you so you'll have the funds you need when you retire.

Retirement is an important - and potentially long - period of your life. At Envoy, we say that “retirement is not only a reward for past service, but a stepping-stone to future service.” As you plan for your retirement years, consider what will impact your retirement savings, income, and your ability go wherever you feel called to serve.

As always, we’re available to help you with all your financial stewardship needs. For assistance, contact our service team at (888) 879-1376, option 1 or by email .

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