You can’t wait to retire one day, but the decision can also be a nerve-wracking one. Will you be able to live on a fixed income for the rest of your life? What if you haven’t planned for an adequate stream of income in retirement? These questions might keep you up at night.
As with most big life changes, preparation is the key to success. We’ve identified the four biggest risks to your retirement, so that you can take action now to prevent problems down the road.
Investment losses. The investment world can be an unfamiliar and scary place for a lot of people, so it’s no wonder investment losses top the list of most people’s retirement worries. Many people choose to make riskier investment choices earlier in their working years, because they have time to make up for any losses before retirement. But you might not want to continue taking those same risks once you’re living on a fixed income one day. We often advise switching to a less risky strategy as retirement nears.
Inflation. Once you retire, your income might remain the same while your expenses increase. However, it’s important to remember that the expenses you face during your working years might be very different from those you’ll confront in retirement. For example, gas and housing might not affect you nearly as much, once you no longer commute or make a house payment. But the cost of some items could impact your budget much more. As you look toward the future, try to identify ways to address those expenses, and consider establishing streams of income that can gradually increase over time.
Health care. Speaking of things that will cost more as you age, health care will probably top the list! The cost of healthcare is rising each year, and Medicare doesn’t actually pay for all medical expenses. You can choose between different Medicare plans as well as supplemental plans, and the choices you make can drastically impact your out-of-pocket expenses. If you’re eligible for a health savings account (HSA), you can actually begin stashing pre-tax dollars for these expenses now! And if you take care of your health during your working years, you might be able to prevent many costly health problems.
Long-term care. While we’re on the subject of Medicare, we should point out the fact that it often does not cover the cost of long-term nursing care. That burden could fall onto you, and it could prove to be a significant expense. As you prepare for retirement, consider whether your income could cover a stay in a nursing facility, or consider purchasing long-term care insurance.
These are just some of the problems you could face in retirement, and you might be worried about something else that isn’t on this list. Whatever your concerns, preparation can help you sleep at night. Give us a call to discuss your options, and we will help you find solutions for your own retirement dilemmas.
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