Americans Must Plan for Retirement
Student
COM/156
March 20, 2011
Megan Barnes

Americans Must Plan for Retirement
Many Americans believe that there is no need of a separate retirement plan to provide for their needs in retirement; they believe Social Security will be all they need. Social Security is a government program that provides economic security to people who have retired. This belief is at best hopeful thinking and at worst completely false for most middle class Americans. A person faces the same needs the day after they retire as they did the day before they took that huge leap. They will still have to find a way to pay for healthcare in their golden years and until a person is eligible for Medicare this can be a significant expense. Medicare is a government health insurance program which partly pays for medical and hospital treatments. Housing costs must be considered and it does not matter whether you rent or own your own home a place to live will cost money. Whether you have a car or ride the bus; transportation expenses will need to be met. Everyone eats and needs a warm place to live in the winter so there will be living expenses and hopefully a person will have a little money left for entertainment.
Healthcare in retirement usually means Medicare; which a person becomes eligible for at age 65. So if you are planning to retire before that age you will be looking at a hefty premium for private health insurance. And once on Medicare additional health care costs can drain your retirement savings in a hurry. Frighteningly a typical married couple retiring in the next 10 years, and needing home healthcare for one person at age 70, will deplete their assets by age 74 (Brown,1992 ). As we get older the cost of our healthcare does nothing but increase so you must plan for the inevitable.
Just because you own your own home does not mean housing costs do not need to be included in your retirement plan. If you own a home there will always be upkeep and maintenance needed and if you rent those costs will always be going up but your Social Security benefit only grows modestly through cost of living increases. So you can count on housing expenses taking a continually larger percentage of your monthly benefit. Also, you must ask yourself how long you can live independently. At some point most people need some form of assistants to meet their daily needs and for a low end assisted living facility you would be looking at $6,000 a month. Housing is right behind healthcare as the most important elements of your retirement plan.
The cost of transportation should not be ignored even thou you may own your own automobile, and if you do own a car there will always be repairs and maintenance. With the average length of retirement at 20 years the chances of needing a new car in that time are close to 100 percent. The cost of a new car today can easily top $20,000 and even used cars can exhaust a person’s savings. For the average person making 100,000 dollars at retirement they will only receive around 2,100 dollars a month benefit. So you can see that a person on Social Security would be hard pressed to make a large car payment. Remember in retirement mobility is the key to independent living.
For most people living expenses go down during retirement but not all. You should take your pre-retirement costs for these expenses like, clothing, food, utilities, entertainment, etc. and figure the post-retirement amount to be from 65-70 percent of that figure. This amount will vary depending on how active you plan on being in your retirement. If you want to travel during your golden years or maybe play golf everyday you will need money to do these things. If your idea of the perfect retirement day is sitting on the porch admiring your flower garden your living expenses will be lower.
Where will the money come from to meet all of these needs? If you say Social Security you may want to rethink your strategy. With the