According to a recent Gallup study, most Americans are worried about their ability to afford a comfortable retirement. Gallup’s annual survey of Americans’ financial concerns found that 54 percent of respondents are worried about retirement. That’s enough to make retirement the top financial concern for the 17th year in a row.1
Those worries may be warranted. Many Americans haven’t saved enough for retirement and haven’t planned adequately for potential risks. Even if you’ve accumulated enough assets for retirement, you could still face serious financial challenges after you leave the working world.
Below are three risks that could sneak under the radar and threaten your retirement. You can minimize these risks by developing and implementing a comprehensive retirement plan. A financial professional can help you take action against these risks to protect your golden years.
Long Life Expectancy
Today’s retirees are living longer than ever. According to the Centers for Disease Control and Prevention, a 65-year-old male in 1950 could expect to live another 12.8 years. By 2014 that number had increased to 18 years.2
Of course, there are many positive benefits to living longer. You get more time to enjoy retirement and to spend with your family, for example. However, a long life span can also be a drain on your retirement assets if you don’t plan properly. The longer you live, the more years you may need to fund out of your personal savings.
There are a few strategies you can use to minimize longevity risk. An obvious strategy is to accumulate enough assets to last multiple decades. Look for ways to cut back your spending and save more. Another strategy is to stick to a budget in retirement and carefully manage your spending. Finally, you also may want to consider an annuity, which you could use to generate a retirement income stream that’s guaranteed for life.
Many retirees assume that Medicare will cover all their medical expenses. That assumption is usually incorrect. Medicare is a valuable resource for retirees, but it doesn’t pay for all your health care costs. It usually covers only a portion of most services. There are many treatments that Medicare covers only partially or doesn’t cover at all.
You could face a significant amount of out-of-pocket health care costs in retirement. In fact, Fidelity estimates that the average 65-year-old couple will face $280,000 in out-of-pocket medical expenses. That figure doesn’t even include long-term care, which can be costly.3
You can minimize exposure to health care costs by funding a health savings account (HSA). These accounts allow you to take tax-free distributions to pay for medical expenses. You also may want to consider a long-term care insurance policy to cover long-term care costs.
A free and open schedule is one of the most appealing aspects of retirement. You get to do what you want with your time. You’re free of the constraints that come with a busy career. However, many retirees soon find that they have too much free time on their hands. Without a job, they may feel that they lack purpose. Some are simply bored.
Many retirees fill their free time with costly activities such as travel, shopping or new hobbies. Obviously, you want to enjoy your retirement, but you don’t want to do so at the sake of your financial stability. You can minimize this risk by developing a budget and sticking to it. You also may want to consider low-cost ways to spend your time in retirement, like volunteering or perhaps even working part time.
Ready to minimize risk in your retirement? Let’s talk about it. Contact us today at Nicky Derouen Financial Services. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
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