If we are to close the racial retirement gap, planning for retirement is an essential part of financial wellness. On average, persons of color have less money saved for retirement than White Americans. This means that many persons of color won’t be able to maintain their current standard of living during their retirement years.
In 2019, the median retirement income for White Americans was $23,292. For Blacks and Latinx, the median retirement income was $16,863 and $13,560 respectively. For all races and ethnicities in the United States, here are the key takeaways about retirement planning.
- Americans (regardless of race) aren’t diligently saving money for retirement.
- Wage gaps contribute to persons of color saving less money than their White counterparts.
- Overall, Black and Latinx workers are less likely to be employed by companies that offer retirement plans.
- Homeownership disparities contribute to decreased generational wealth and the lack of retirement savings in communities of color.
Whether you’re at the beginning of your career or approaching retirement age, it is time to take steps to secure your financial future. There are several things you should consider when it comes to creating a sound retirement plan. Below are seven questions to ask yourself when planning for retirement.
1. How much money do I need to retire?
Many financial experts agree that your retirement income should be a minimum of 80% of your employment income. For example, if your current annual income is $200,000, your retirement income should be at least $160,000 per year.
You can adjust the amount up or down depending on a few factors. These include your debt, Social Security income, savings, part-time employment income and nest egg.
The following retirement calculators can help you determine what you will need during your golden years.
2. How can I catch up on retirement planning if I haven’t been saving for it?
It can be disheartening to find out that you don’t have enough money saved for your retirement years. Once you get over the initial shock, take control of the situation by taking action.
Here are just a few things you can do to get started.
- Max out your 401(k) plan at your job.
- Start a business.
- Get disability coverage.
- Find ways to boost your income.
- Apply for higher-paying jobs.
- Contribute to your Roth IRA.
- Eliminate credit card debt.
- Plan to work at your job longer.
- Create passive sources of income.
3. What are the typical healthcare costs during retirement?
As you get older, your healthcare costs may increase. This is especially true if you are paying for out-of-pocket health insurance. Retirement health costs may include long-term care, insurance premiums, co-pays, deductibles, dental plans and vision plans.
Estimated annual healthcare costs by age are:
- 65 – $12,286
- 70 – $16,155
- 75 – $21,164
- 80 – $27,060
- 85 – $34,268
4. Are there any benefits of delaying retirement?
Yes, there are several benefits of delaying retirement. You can contribute more money to boost your Social Security benefits. By delaying your retirement, you can save more money. Another benefit is you can continue to qualify for your employer’s health insurance package and contribute to your retirement plan.
5. If I am collecting a pension, what happens if my previous employer goes out of business?
Most retirement benefits are covered by a government agency known as the Pension Benefit Guaranty Corporation. Depending on your plan, you may still get your pension income even if your employer goes bankrupt although the monthly income may change. Contact your employer to learn about the protections that are available.
6. When can I apply for Social Security retirement benefits?
You will be eligible to collect your Social Security retirement benefits after your 62nd birthday. You should know that your age and earnings can affect the amount of your benefits. Learn more about collecting your benefits on the Social Security retirement benefits page.
7. How should I plan for retirement if I own a business or am self-employed?
There are more than 57 million people who work for themselves in the United States. As a self-employed person, you are responsible for building your own retirement plan. This means that you have to implement a retirement savings strategy and stick to it no matter what.
Quite frankly, saving for retirement can be challenging for self-employed individuals due to several factors. These include consumer debt, healthcare expenses, costs of operating a business and the lack of steady income.
As an entrepreneur, you know how to overcome challenges and setbacks. By implementing a strategic plan with discipline, you can face these unique challenges.
Available plans for self-employed individuals include:
- One-participant 401(k) plans
- Keogh plans
- SIMPLE IRA
- SEP IRA
Planning for retirement is an individual endeavor that may require expert help. That’s why it’s a clever idea to meet with a financial advisor to discuss ways to meet your retirement goals.
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