Knowing the risks that may be found in retirement and the ways in which they can harm financial security is critical to making important modifications in a retirement plan. Sometimes without those changes, the effect of unfavorable and unpredictable events can be far worse.
The Bay City (TX) Tribune’s recent article, “5 hidden risks in Retirement” says that once you have a retirement plan in place, it’s not etched in stone. Circumstances change, and you may add or lose family members, your retirement objectives may shift, the economy may create new considerations and financial innovations may present new opportunities.
Be sure that your retirement plans (and beneficiaries) are current. Review these at least once a year.
Retirees and those making retirement plans should know about these five risks:
- Running out of money before you die, is a primary concern of most retirees. This is even a greater concern, as the average life expectancy has increased.
- Be certain that both you and your spouse are protected from the unexpected, such as the financial impact of the loss of one spouse. The surviving spouse will only get the higher of your two Social Security checks. Life insurance and estate planning are important to protect survivors.
- A longer life expectancy could result in high costs in a long-term care facility. Look into long-term care insurance.
- Know that a 50% gain doesn’t let a portfolio recover from a 50% loss. It takes a 100% gain to restore a 50% loss. Common stocks have substantially out-performed other investments over time and are usually recommended for retirees, as part of a balanced asset allocation strategy.
- Finally, plan on prices for food, goods, and services to increase during retirement, which reduces your buying power incrementally because you’re living on a fixed income. You must factor that in.
Knowing what the potential post-retirement risks are and considering them in the retirement planning stage, will help you be sure that they are mitigated and managed properly.
Reference: The Bay City (TX) Tribune (July 19, 2019) “5 hidden risks in Retirement”