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Retirement has a different meaning today than it did in previous generations.  Here are a few highlights of how it differs:

“I’ll continue to work during retirement”

As Americans consider their outlook for retiring, many are assuming the easiest way to deal with their lack of preparedness is to decide to just continue to work during what would otherwise be their retirement years. In fact 70% of employed Americans plan to work beyond the age of 64. The reality is that only about 28% of current retirees were actually able to do so. Numerous factors are impacting retirees such as personal health issues, family obligations and employer problems, which may include losing their job. Longevity also continues to be a recurring theme. A 65 year old couple today has a 91% chance that at least one member will live to be 80 years old, and a 52% chance of making it to 90. More than ever, Americans need to plan for at least 30 years of being in retirement.

“My spending patterns won’t change much in retirement”

The highest area of inflation by spending category over the past 30 years is medical care. The inflation rate for this area has been 5.3%, when inflation for things like housing and transportation has hovered below 3%. Additionally, out of pocket medical expenses are three times larger for individuals 65 or older, versus those between the ages of 25 to 34. On average, out of pocket expenses for medical care are 15% of retiree expenses, or about the same as the cost for food.

My medical expenses will be covered”

First off, only about 27% of retirees report having access to employer medical coverage. More importantly, the costs for those who don’t have employer medical coverage are significant. For those individuals retiring in 2010, the present value of savings needed to cover 90% of the possible health outcomes and prescription drug expenses is $187,000 for men and $213,000 for women, who typically live longer. Those same expenses are expected to be $313,000 for men and $357,000 for women by 2020.

*JP Morgan Guide to Retirement, 2012.