April was Financial Literacy month and we wanted to see how literate the average person is related to finances, so we created a quiz and many of you took it. If you took the quiz and are reading this, THANK YOU for participating. We had fun with it, and it gave us an idea of what things people know about and also where there may be some confusion.
At AGFinancial, we love helping people gain a better understanding of finances and how to live a financially healthy life. With that in mind, we thought it would be good to highlight questions that left some scratching their heads. Below we reveal the three most commonly missed questions and share our answers.
How much should I save for medical expenses in retirement?
Planning for healthcare costs in retirement can be tricky. As you can imagine, there are many factors based on age, overall health, and healthcare expense trends. While the answer will be different for everyone, the average retired couple age 65 or older needs approximately $285,000* saved to cover health care costs even when on Medicare. If you retire prior to age 65 (Medicare eligibility), you will need even more for medical expense coverage. When looking at all expenses in retirement, healthcare is typically the largest expense.
How long should I wait to retire?
If the answer to this question was easy, it wouldn’t have made this list. Each individual needs to consider a few factors when answering this big question – desire to retire, current and future retirement savings, and life expectancy.
From a purely financial perspective, the longer you wait to pull the trigger on retiring and drawing Social Security, the better. But how long should you wait? If you are able to defer claiming Social Security benefits until age 70, you will be able to receive the maximum increased benefit. Click here for the Social Security Benefits calculator.
But how can you hold off that long? Planning now and making consistent contributions to a retirement plan could provide the flexibility you may need later to delay your Social Security claims and allow you to reach your maximum benefit payment.
How much life insurance should I have?
Nearly half of the people that took this quiz did not know how much life insurance they needed based on their annual salary. Many thought an amount equal to double their annual salary would be sufficient coverage, however, the basic rule of thumb suggests coverage be 10 times your annual salary.
Life insurance can help take care of your family and loved ones so it is important to know how much you need. The amount of life insurance needed can vary greatly depending on how many dependents you have, how old you are, and how much debt you have. When looking at life insurance, consider the basic needs of paying off debt and covering all expenses for at least one year. From there, you may also want to consider covering college expenses for your children and paying off your home and vehicles. To learn more on how AGFinancial can help you provide for your loved ones visit this page.
Hopefully this article has helped you better understand these three financial topics. If you’d like to dig deeper into financial education, we invite you to explore the many educational resources found on our website.
This information is from sources deemed reliable. Information is subject to error, omission, withdrawal, or change.