Acarefully planned retirement can be derailed due to an untimely death, a stock market crash, and a variety of
other unforeseen events.
While it is impossible to control the
market or predict what curveballs life may
throw your way, you can prepare for some
of the more common retirement risks to
put your mind at ease.
Don’t get blindsided! Have a plan in
place to combat these five retirement risks
and you’ll be on your way to retirement
Outliving your money
Thanks to improvements in science, health, and
technology, Americans are living longer than ever.
According to the Social Security Administration, a man
turning 65 today can expect to live until age 84 on
average, and a woman until age 86. One in four will
live past age 90, and one in 10, past 95.
A longer life could mean a longer retirement. Are
you prepared to fund a 30+ year retirement? The
reality is that most Americans are not.
What can you do to be sure you won’t outlive your
money? Consider extending work, delaying Social
Security for a higher payout, or saving more today.
The financial implications of underestimating your
retirement years could be devastating.
Inflation is a hidden enemy that causes your
retirement dollars to lose value over time. While not
as dramatic as a market crash, inflation can be just
as dangerous to your nest egg as it slowly eats away
at your purchasing power. Although inflation has been
relatively low, even a modest 3% would cause the value
of your $1,000,000 portfolio to be cut in half in about
23 years – that means your million-dollar nest egg
could only buy what $500,000 could get you today.
With retirements lasting longer than ever before, and
retirees generally being invested in more conservative
portfolios, the exposure to inflation risk in retirement
could be monumental.
So how do you keep up with the rising cost of living?
Consider the overall constitution of your portfolio
and what kind of investments may help you outpace
inflation. Consult your advisor to determine how much
you need to allocate to stocks or stock funds. Consider
investing in alternative asset classes – like commodities
or real estate – that tend to rise along with inflation.
Most importantly, start planning today! Find out if
your pension is adjusted for inflation, determine if it
makes sense to delay Social Security to get a higher
benefit, and be aware of your retirement lifestyle and
expenses so inflation doesn’t sneak up on you.
Unforeseen Medical Costs
It’s no surprise that healthcare costs are the number
one concern of the Baby Boomer generation. According
to a recent Vanguard study, a 65-year old female in
average health is expected to pay $5,200/year for
retirement healthcare. An 85-year old female in average
health would pay about $10,100/year. And these costs
are increasing at a dramatic rate.
Medicare is a primary component of many retirees’
health plans, yet it can be challenging to navigate
the alphabet soup of Medicare plan options. Factors
like health status, geography, and income must be
considered when choosing a plan that is right for you.
Additionally, when it comes to Medicare, timing
Finance | Retirement Risks
Five Common Retirement Risks
& How to Manage Them
Rebecca Meares, CFP®, AWMA®, & Justin Caudle, CFP®, AWMA®