The ability to adapt to change is an important skill at any stage of life. During retirement, there are financial risks that may require changing your original plan, from where you live to how you spend your days. Being unable to make changes, could make a bad situation 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.
Planning with the knowledge that there may be changes needed to your plan and building in flexibility, like being open to part-time work or a less expensive living situation, can protect your retirement in the long run.
Reference: The Bay City (TX) Tribune (July 19, 2019) “5 hidden risks in Retirement”