Ten Financial Risks of Retirement

When you sit down with your spouse and financial advisor to do some retirement planning, you make the best effort you can to prepare for the future.  Like it or not, these ten financial risks of retirement can sneak up on you and make your golden years a struggle.  Thankfully, there are ways to minimize these challenges by formulating a strategy that helps your assets continue to grow despite any blips in the economy or unexpected expenses.  By understanding the possibilities presented by the factors listed below, you will be in an advantageous position when it comes time to lay out your strategy for the years leading up to your final day on the job.
Lifespan
Though it’s tough to imagine a long retirement being a bad thing, the fact of the matter is you are far more likely to live to 85 than you think.  Advances in medicine, not to mention good genes and healthy habits, could have you pushing 95 or 100 – and your money has to make it there, too.  Invest as though you’ll live into triple digits and you’ll be in great shape.
Inflation
It’s a simple fact of life that the cost of everything increases over time.  Consider the purchasing power of $10 in 1980 was equivalent to almost $21 just 20 years later in the year 2000.  What can you do to keep your money from only going half as far?  Invest in inflation-protected securities or industries likely to gain as prices increase.
Market Dips
As the years after the sub-prime mortgage collapse in 2008 have shown, the market is a fickle mistress.  The instability of the global financial system continues to turn stomachs all over the planet, but the best thing you can do is diversify as much as possible.  This goes beyond the size of company or type of assets in your portfolio, too – pick companies from different regions so problems in one are less likely to affect your bottom line.
Early Maturation
Though you might have a handful of bonds that aren’t set to come good for a while, be mindful of the possibility they will be called early.  Though this is an opportunity for reinvestment, of course, you might find it difficult to locate something with a similar return.  Stagger your maturity dates so that your repositioning is less likely to happen all at once.
Cashing Out in a Low Market
For most people, a 401(k) or mutual fund contribution is based on the purchasing power of what they’ve set aside – when the prices are down, they get a lot more than when prices are high.  Though you might not think it too much of an issue, it can be a major problem if you are looking to sell during a downturn.  Your only option is to get fair market value, which means you are losing out on the possibility of benefiting from a future upswing.  Make sure you have plenty saved to cover your expenses for as long as possible so you can allow your portfolio to pick back up.
Fraud
Sadly, there’s not a year that goes by in which a group of senior citizens are robbed of their wealth by spurious characters going door to door.  Though you are fit and sharp now, where might you be in a couple decades?  Do your best to educate yourself now about the risks, involving trustworthy family members, if possible.  By having a background knowledge, as well as someone to act as your back-up when a too-good-to-be-true opportunity pops up, you have already set up a first line of defense.
Taxes
You might assume that, without a steady job, taxes aren’t something you will have to focus on much in your life after work.  Well, that’s not exactly the case.  Changes in the tax code happen all the time, subjecting earnings from investments or capital gains to a varying degree of vulnerability.  Sometimes thousands or tens of thousands of dollars could be at stake.  On the front end, you can put after-tax funds into Roth IRAs, but more complex dealings should be done with the help of a trusted financial professional.
Medical Costs
Adults who have cared for their parents during the last several years of their life know how much time is spent in the doctor’s office.  Even the fittest of people still has one or two prescriptions, an annual physical, and some wellness visits to make each year.  That leaves a lot of copays.  One way to help cover costs you face outside of Medicare is to create a Health Savings Account.  This will allow you to rollover any savings from year to year and, much like you did with your investments before retiring, you can make a set contribution each month.
Chronic Care
We all would like to think we will be on top of our game until our very last breath, but the fact of the matter is quite different.  More and more people are finding health care services are necessary during their final years, which can be fairly minimal (someone stopping by to administer medications) to very extensive (living in a medical home).  You can purchase insurance policies to cover just this kind of expense or set up specific accounts to be paid only when they are needed, but this area of financial planning is somewhat new, so you might want to consult with your advisor about the best option.
Unexpected Events
It might seem like Mother Nature would be the last thing for any of us to worry about, but sometimes disasters arise and leave people in the lurch.  This doesn’t take into account a fire or some other property damage that destroys what most people consider their most important investment – their home.  Regardless of where you live, it’s crucial as you head into retirement that your insurance coverage is good enough to provide security in the event of a major problem.

When you sit down with your spouse and financial advisor to do some retirement planning, you make the best effort you can to prepare for the future.  Like it or not, these ten financial risks of retirement can sneak up on you and make your golden years a struggle.  Thankfully, there are ways to minimize these challenges by formulating a strategy that helps your assets continue to grow despite any blips in the economy or unexpected expenses.  By understanding the possibilities presented by the factors listed below, you will be in an advantageous position when it comes time to lay out your strategy for the years leading up to your final day on the job.
Lifespan
Though it’s tough to imagine a long retirement being a bad thing, the fact of the matter is you are far more likely to live to 85 than you think.  Advances in medicine, not to mention good genes and healthy habits, could have you pushing 95 or 100 – and your money has to make it there, too.  Invest as though you’ll live into triple digits and you’ll be in great shape.
Inflation
It’s a simple fact of life that the cost of everything increases over time.  Consider the purchasing power of $10 in 1980 was equivalent to almost $21 just 20 years later in the year 2000.  What can you do to keep your money from only going half as far?  Invest in inflation-protected securities or industries likely to gain as prices increase.
Market Dips
As the years after the sub-prime mortgage collapse in 2008 have shown, the market is a fickle mistress.  The instability of the global financial system continues to turn stomachs all over the planet, but the best thing you can do is diversify as much as possible.  This goes beyond the size of company or type of assets in your portfolio, too – pick companies from different regions so problems in one are less likely to affect your bottom line.
Early Maturation
Though you might have a handful of bonds that aren’t set to come good for a while, be mindful of the possibility they will be called early.  Though this is an opportunity for reinvestment, of course, you might find it difficult to locate something with a similar return.  Stagger your maturity dates so that your repositioning is less likely to happen all at once.
Cashing Out in a Low Market
For most people, a 401(k) or mutual fund contribution is based on the purchasing power of what they’ve set aside – when the prices are down, they get a lot more than when prices are high.  Though you might not think it too much of an issue, it can be a major problem if you are looking to sell during a downturn.  Your only option is to get fair market value, which means you are losing out on the possibility of benefiting from a future upswing.  Make sure you have plenty saved to cover your expenses for as long as possible so you can allow your portfolio to pick back up.
Fraud
Sadly, there’s not a year that goes by in which a group of senior citizens are robbed of their wealth by spurious characters going door to door.  Though you are fit and sharp now, where might you be in a couple decades?  Do your best to educate yourself now about the risks, involving trustworthy family members, if possible.  By having a background knowledge, as well as someone to act as your back-up when a too-good-to-be-true opportunity pops up, you have already set up a first line of defense.
Taxes
You might assume that, without a steady job, taxes aren’t something you will have to focus on much in your life after work.  Well, that’s not exactly the case.  Changes in the tax code happen all the time, subjecting earnings from investments or capital gains to a varying degree of vulnerability.  Sometimes thousands or tens of thousands of dollars could be at stake.  On the front end, you can put after-tax funds into Roth IRAs, but more complex dealings should be done with the help of a trusted financial professional.
Medical Costs
Adults who have cared for their parents during the last several years of their life know how much time is spent in the doctor’s office.  Even the fittest of people still has one or two prescriptions, an annual physical, and some wellness visits to make each year.  That leaves a lot of copays.  One way to help cover costs you face outside of Medicare is to create a Health Savings Account.  This will allow you to rollover any savings from year to year and, much like you did with your investments before retiring, you can make a set contribution each month.
Chronic Care
We all would like to think we will be on top of our game until our very last breath, but the fact of the matter is quite different.  More and more people are finding health care services are necessary during their final years, which can be fairly minimal (someone stopping by to administer medications) to very extensive (living in a medical home).  You can purchase insurance policies to cover just this kind of expense or set up specific accounts to be paid only when they are needed, but this area of financial planning is somewhat new, so you might want to consult with your advisor about the best option.
Unexpected Events
It might seem like Mother Nature would be the last thing for any of us to worry about, but sometimes disasters arise and leave people in the lurch.  This doesn’t take into account a fire or some other property damage that destroys what most people consider their most important investment – their home.  Regardless of where you live, it’s crucial as you head into retirement that your insurance coverage is good enough to provide security in the event of a major problem.

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