Your retirement should be one of the best times in your life, spent with your loved ones and traveling the world as you see fit. Whatever your perfect retirement looks like, the last thing that you want is to put your retirement at risk. You need to ensure that you’re prepared for the most common retirement risks facing older Americans today so that your retirement doesn’t become a time of constant stress and worry.
The retirement pros at Maggi Tax have identified the five most common retirement risks that you should know about so that you can be prepared for them and live a retirement filled with love, laughter, and unforgettable experiences.
Here are the five retirement risks you should know about:
Longevity risk is simply the risk of outliving your projected lifespan that your current retirement plan is budgeted for. If you were to outlive your savings, which is highly possible for many older Americans, especially if they live a healthy lifestyle, you may struggle to get by on Social Security alone. And if you’re living on that alone, you may find yourself surviving just above poverty level depending on your earnings before you retire.
How To Prepare for It: The best way to combat the risk of longevity is to be sure that you have a significant retirement nest egg that provides sufficient income at a safe and secure withdrawal rate. For instance, if you want to ensure that you have $30,000 in revenue from your savings account, you will have to invest a minimum of $750,000 before leaving the workforce. Especially if you’re planning to follow the 4% rule, also consider maximizing your Social Security benefits by claiming them as late as possible to avoid any early-filing penalties.
This is the risk of investment losses due to market fluctuation. You will come across these losses even after you’re retired because of the nature of investing in the market. But while it’s a risk that many retirees are taking to earn reasonable returns, it doesn’t mean that you have to allow the changes in the market to impact your nest egg.
How To Prepare for It: Be sure to always maintain an appropriate asset allocation by not investing too much of your savings in the market. Maximizing your retirement means you will have enough liquidity to cover anywhere from two to five years of living expenses, so you don’t have to sell investments at a loss. In addition, the more diversified your portfolio is, the more mitigation of market risk you’ll have during your retirement.
This refers simply to any unexpected and costly health issues that may occur for you or your spouse during retirement. Unfortunately, older Americans are more likely to encounter some years of poor health that incur significant medical expenses.
How To Prepare for It: The best way to prepare for costly and unexpected health risks is to stay ahead of your health through regular preventative care, exercising, and eating right. Be sure to factor in healthcare spending when you’re outlining your retirement savings goals and take advantage of a health savings account if you have gone through your employer. Understanding which Medicare benefits and plans are best suited to your specific medical needs is another great way to help prepare for any health risks that may arise during retirement.
This risk is any unforeseen risks and needs of your family members. For instance, if you end up serving as the caregiver for your sick spouse or even providing financial support to your adult children.
How To Prepare for It: this is one of the most challenging retirement risks to plan for during your retirement years. Because it typically involves having incredibly tough conversations with your loved ones about what you can and will do for them. Clearly outline your expectations and ability to provide so that you don’t have your family draining through your retirement security and savings.
The last retirement risk to be on the lookout for is policy risks. These are risks associated with any possible retirement benefit cuts that may occur during your entire retirement years. And it’s one of the most severe risks of them all because Social Security’s trust fund is projected to be depleted of money in 2035, which will cause a 24% cut to your Social Security benefits.
How To Prepare for It: The only way to stay ahead of this retirement risk is to ensure that your retirement savings plan is not reliant on government benefits to live and survive. You want to build your retirement plan in such a way that you’re able to live on your savings alone, and any potential Social Security benefits are just an extra added income that can be used to supplement your savings or even invest.
No matter what stage of your retirement planning you’re at, you want to be sure to be prepared for all five of these retirement risks. The more steps you take to protect and secure your retirement savings and plan, the more fun, travel, and memories you’ll enjoy in your golden years. Want to learn more about how you can protect your retirement or build a strategic and effective retirement plan? Call the friendly retirement experts at Maggi Tax today at (813)-850-0131.