RETIREMENT ROADBLOCKS
7 Financial Risks to Avoid
RETIREMENT ROADBLOCKS
7 Financial Risks to Avoid
Retirement is going to cost you a lot more money than you think!
Be concerned. Very concerned.
That’s what a new study showing how much you’ll need to be OK in retirement says. You thought living off 70% or 80% of your pre-retirement salary would be enough? Think again. Try around 130%.
That’s right. You may need to generate more, a lot more, income in retirement than you think.
Here’s the premise. When you’re no longer working 40 hours a week (or more if you’re a typically overworked person), that’s 40 hours a week when, all of a sudden, you’re available to spend money. Everyday’s like Saturday. On top of that, a lot of things your employer used to pay for — like coffee, a laptop and phone, maybe a subsidized gym membership, tuition reimbursement — that’s now on you.
The study also says that unlike fixed expenses like housing and utilities, which will generally stay about the same (if you stay in place), spending can vary widely. If you own your home, the costs of maintenance and repairs can be through the roof. Maybe you’re a foodie and want to eat out three nights a week. Maybe you’ll give in and get that sports car you’ve always dreamed of, which will not only cost you a pretty penny but jack up your insurance and maintenance tab. What if you plan to take several cruises each year? What if you have three daughters? That’s three weddings you’re probably on the hook for.
I could go on with a lot more examples, but you get the idea. In other words, retirees are like snowflakes: No two are alike.
The biggest risk to your financial security is Inflation.
Risk # 1 – INFLATION: Everything keeps getting more expensive.
Everyone is faced with extreme financial strain from multiple forces in today’s economic climate. Your lifestyle is under attack by never ending higher costs for goods and services that we purchase and consume. The US Dollar continues to erode in value and does not go as far in purchasing power that it once enjoyed.
Just look at what’s happened since the 1970s when the IMF Board of Governors suspended the convertibility of the U.S. dollar into gold, effectively moving the U.S. to a fiat currency system. Since then, the prices on food, clothing, transportation, housing, utilities, health care, etc. have been on a huge upward trajectory with no foreseeable end in sight.
Risk # 2 – HEALTH CARE: Residing in Assisted Living
The data shows that more than 70% of people will spend at least 1 to 2 years of their retirement in an Assisted Living Facility. Costs fluctuate depending on where you reside at the time and the level of requested services, but the national average is currently between $5,000 – $6,500 per month (x12 mo’s = $60,000 – $78,000 annually). AARP and AssistedLiving.org report statistics that show 30% of residents are between age 75 and 84, with 50% at least 85 years old.
Imagine what the cost will be 20 years from now when you’re 85… wow! Experts predict 2x the price! Medicare insurance doesn’t cover this expense and most people don’t have Long Term Care insurance either. This big expense can see your savings dramatically reduced and shorten the time it will last.
Solution: An included benefit of a Fixed Index Annuity, can double your income payment that can go towards paying for the expense of residing in an ALF.
RETIREMENT ROADBLOCKS
The 7 Financial Risks To Avoid
At American Financial Security, we have spent years helping retirees and pre-retirees navigate the twists and turns of their retirement journey. Through experience, we’ve learned that most retirees will face a few, if not all, of these seven significant financial roadblocks in their retirement.
And because those roadblocks could potentially expose your retirement to unnecessary danger, we often refer to them as financial risks. The good news is that the sooner you are aware of these potential risks, the sooner we can help implement strategies to help avoid them.
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Learn more about these Roadblocks and the 7 Financial Risks in the videos below.
INFLATION: Same Money… Less Power.
Over time, your ability to maintain purchasing power can be impacted by increases in the cost of goods and services. As a result, your retirement income may need to increase each year to maintain your standard of living.
HEALTH CARE: Expect the Unexpected.
Healthcare costs are one of the largest expenses in retirement. These unpredictable costs can catch you off guard and derail your retirement with expenses that can affect your financial well-being.
SEQUENCE OF RETURNS: Timing is Everything.
Market volatility may pose major challenges when withdrawing money from retirement assets. Withdrawals during market downturns in retirement could create a domino effect with no time to recoup those losses.
WITHDRAWAL RATE: Making Money Last.
When you take money out of your savings for retirement, you want to be sure you aren’t emptying your tank too quickly. Aggressive withdrawal rates can compromise your retirement assets’ ability to generate income throughout your retirement.
TAXATION: Pay Now or Pay Later.
With the national debt rapidly rising, tax rates and rules could change at any point. Diversifying your retirement savings into different tax vehicles can limit your exposure to these changes.
SOCIAL SECURITY: Choose Wisely.
With a multitude of options to choose from on when and how to file for Social Security benefits, it is only logical to take a closer look at which choice may guide your retirement income journey in the direction you want to go.
LONGEVITY: Longer Life… Bigger Risk.
Today’s advancements in medicine are seeing more than half of retirees living to at least age 90. This could result in greater than anticipated retirement income needs. Longevity is the “risk multiplier” for other retirement income risks.
We're here to help.
When you’re ready to protect your savings from the 7 Financial Risks, pick up the telephone and give us a call. A 15-minute conversation will start you on the road to eliminating the Retirement Roadblocks and having the financial security you desire.
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