Saving during retirement helps us mitigate the top risk associated with retirement such as increased longevity and high emotional, financial, and health costs associated with it. We are living in a time of increased inflation costs. Loss of a spouse and declining health are yet additional reasons why we should save during retirement. A 65-year-old American man is expected to live 17 years on average, while a woman the same age can expect to live 20 years. Fully 30 percent of women and 20 percent of men can expect to reach age 90.

Listed below are reasons why it is important for you to save during retirement:

Longevity and high costs associated with it

We do not have a way to predict whether we will live up to 90 or die before 70. We better be prepared than sorry as with longevity risk increasing there is a high likelihood that we will outlive our retirement savings. Thus, we will be exposed to increased financial and health costs associated with living longer. Not to mention that our personal savings rate has declined to 1% from 5% just within the last 10 years. Thus, it is critical to save during retirement in order to increase your retirement savings and reduce longevity risk.

Inflation

Inflation is a major retirement risk as it eats away the value of investments and reduces our purchasing power. The rate of inflation could even be even worse in the future especially for health care expenses as they alone tend to rise much more rapidly than general inflation. The only way for you to manage the risk of inflation is to save and invest.

Loss of spouse

Women tend to live longer than men and have been younger than their husbands traditionally. Thus, periods of widowhood of 15 years or more for women accompanied by a decline in living standard are common. Surveys confirm that more than four in 10 widows rely on Social Security as their only significant source of income. According to research, single person needs 80% of the income needed by a married couple while Social Security benefit paid to a survivor typically varies from between 50% to 67% of what the couple received.

Declining health

According to research, it costs $18 per hour for a non-Medicare but a licensed home-based service, $38 per hour for a Medicare-certified nurse, and $59 a day for adult day care. Not to mention that it costs $36,096 per year for an assisted living facility and $72,800 for a nursing home. These figures alone should be sufficient reasons for why you need to save during retirement.

Learn more about this author, Amela Piric.
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