You have worked hard, you have saved and now it’s time to start thinking about retirement. Are you ready? How can you know for sure if you have saved enough? The word “retirement” means different things to different people. Regardless of the vision you have for your retirement, it’s an event that can produce much satisfaction when you have a blueprint for what a successful retirement will mean to you. Without a plan, however, including an assessment of your retirement readiness, retirement can become a period of anxiety, as you worry about whether your finances can sustain you through a potentially long retirement. Most people fear running out of money in retirement more than they fear death.
Let’s take a look at the top five financial risks you’ll face in retirement:
Outliving Your Assets: The odds are that you’ll live a long time after retiring. That’s the good news... the bad news is that you’ll need sufficient assets to provide retirement income over a potentially long period of time. The alternative is to risk outliving your retirement income.
Inflation: With inflation, the cost of goods and services increase over a period of time, meaning that you’ll need more retirement income in order to keep pace with inflation. Everything inflates at different rates. It is important to track your individual spending habits and needs with the rate of inflation associated with each. For example, a set mortgage payment is not going to be affected by inflation, but your grocery bill will be.
Loss of a Spouse: With longer life expectancies and the tendency to marry men older than they are, women can face a dramatic decline in retirement income at a husband’s death. Statistically speaking, women outlive men in almost every society.
Healthcare Expenses: While Medicare covers many healthcare expenses, retirees need to be prepared to pay for Medicare-related premiums, as well as expenses Medicare doesn’t cover. If you’re planning to retire prior to age 65, you’ll need a way to pay for healthcare expenses until you become eligible for Medicare.
Long-Term Care Expenses: While there are a variety of long-term care services, ranging from care in the home to assisted living facilities to nursing homes, all of them are expensive. Morningstar reports that by 2050, 15 million people will have a high long-term care need. It further states that expenditures went from $30 billion going to long-term care in 1980 to $225 billion in 2015. We can only imagine what it will be when 15 million people will need it. If you or a spouse need long-term care, how will you pay for it?
Any assessment of your financial readiness to retire should take these risks into account, together with an evaluation of whether you can afford the type of retirement you want. Even if you are already retired, it’s a good idea to evaluate where you are to determine what, if anything needs to be adjusted.
Holly Peterson is the owner of Elite Retirement Strategies and former radio show host. She is a professionally licensed insurance producer specializing in retirement planning and safe money solutions. As a regular seminar speaker, she acts as a catalyst in helping others achieve their financial objectives. Holly serves all of Idaho. You can find her online at eliteretirementstrategies.com. 208-252-4345.