Why ‘Holistic’ Retirement Might Be a Better Option for People With Low Savings
Written by
Vance Cariaga
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Saving for retirement is not a one-size-fits-all undertaking, even though many financial experts recommend hitting certain targets. One theory is that you should have one times your annual salary saved by age 30, three times your salary at 40, five times your salary at 50, and upward from there. But if you are falling behind those targets, one solution is to take a holistic approach to retirement.
There is no single definition of “holistic” retirement planning, though it usually means taking a rounded view that includes every financial aspect of your life. For example, Stephen Chen, founder of California-based financial planning platform NewRetirement, stresses the importance of looking past the usual metrics for retirement planning and focusing on your own special circumstances.
“Our models go beyond savings and investments, taking into account all of the other factors in a person’s life, from home equity, healthcare costs and taxes to Medicare and Social Security,” Chen told TechCrunch in a recent article. “We account for thousands of different scenarios, enabling users to confidently map out accumulation and decumulation projections with digital guidance.”
Chen got the idea for NewRetirement after his own mother struggled with retirement planning but didn’t have a high enough net worth to attract professional financial advisors.
“People like my mom lack the tools to look at their money holistically and strategically so they can make informed decisions, monitor their financial situation, understand which levers to pull and when and make the connection between the choices they make today and the long-term ramifications to their plan,” Chen said.
Another way to look at holistic retirement planning is through the lens of four main focus areas, according to a 2022 Newsweek column by Ron Ray, owner of Texas-based Turning 65 Solutions Tax and Insurance LLC:
- Health: Healthcare costs are “perhaps the biggest threat to retirement savings people will face,” Ray wrote. “A holistic retirement planner understands how to use the benefits of COBRA, the Affordable Care Act, original Medicare and Medicare Advantage. Having an appropriate health insurance plan can reduce the financial risks associated with health care to a manageable level.”
- Longevity: With people living longer, Ray recommends looking beyond just long-term care insurance and considering other types of insurance policies, such as life insurance, to fund long-term care.
- Legacy: In this case, “legacy” is what you might leave behind to heirs – something Ray said you should not stress over unless you have the financial means to leave an inheritance. In this case, he suggests that you “drill down into the most appropriate uses of life insurance and legacy planning.”
- Income: When considering income, you should not only account for the salary you earn but also Social Security benefits you will accrue, pensions, annuities, IRA/401K accounts and any other income streams.
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