“Retirement doesn’t mean sitting and fishing, it also means actively managing risks and being able to make needed adjustments.” — Lawrence Castillo
There are many critical decisions to consider when building your sound retirement roadmap. You may wonder exactly when you should start saving for the day you no longer work. You might also ask yourself questions about how much you should save, how long you might spend in retirement, and how best to spend down your savings, so you don’t run out of money.
It’s a safe bet that your retirement won’t look anything like that of your parents or grandparents. Retirement in the 21st Century is likely to be more active, more expensive, and more prolonged.
Since life expectancies are increasing due to medical and technological advances, you will need to manage the key risks most retirees will face proactively and strategically.
While many pitfalls await you once you start strategizing for retirement, I have identified five key risks for which you must become well-planned. If left unaddressed, these threats could be harmful to your wealth both now and in the future. What are the five most critical retirement risks?
1. You may live longer than you imagine
Living as long as possible is a goal for many, if not most, retirees. And why not? Today’s retirees are generally healthier and more active than ever before. However, living longer brings with it a unique set of challenges for which you must plan. And longer lives exacerbate the usual retirement risks as well North Americans now live an average of 78.6 years (men), with women living about five years longer than men. (81.1 years versus 76.1 years)
2. Healthcare costs continue to rise
Improvements in pharmaceuticals, innovative new procedures, and medical technology advancements are primarily responsible for increases in lifespans during the past twenty years. However, these improvements come at a cost. In the United States, which has the most expensive healthcare globally, a visit with your primary care practitioner costs an average of $190.00. If you must stay in a hospital, you can expect bills amounting to tens of thousands of dollars. Many Americans still don’t realize that Medicare will not pay for every medical procedure you could need as you age. Long-term and memory care are two potential needs for which you must plan.
3. Your money doesn’t grow
Seniors in the United States can live twenty, even thirty years or more after retiring. This potential for longevity means that it is essential to have portfolio growth and multiple income streams in retirement. Without steady, reasonable growth, seniors could potentially run out of money well before they run out of life.
4. Inflation gobbles up your cash
Despite what you may hear from the government, inflation is a clear and present danger to retirees. Official inflation numbers don’t always reflect reality, either. If you go to the store regularly or pay bills, you know that everyday items have seen price spikes, especially since the beginning of the pandemic. According to the USDA, food prices for meals cooked at home went up 3.5 percent. Take-away food prices rose 3.4 percent. That is significantly higher than the average of 2.0 percent over the last twenty years. Since food costs comprise 20 percent of the average family budget, you can see how this could impact retirement savings.
5. It is hard to “get down from the mountain”
When you are building up your retirement savings, your objectives and goals differ from your “spend-down” period. The financial advisor who helped you accumulate your wealth may not be as competent at helping you spend it properly. You will probably need a qualified retirement and income specialist to help you disburse your savings wisely. Otherwise, you could wind up running out of money.
Summing it up
Although retiring with enough money to support a healthy, active lifestyle may be challenging, it is achievable. Taking a hard look at the five most pervasive risks to your wealth will help you address them now before they destroy your nest egg. You don’t want to plan alone, though. Find a retirement and income specialist who can help you make the wisest decisions about your wealth.
(Lawrence Castillo is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. L and C Retirement Income Planners, 4801 Lang St. NE Suite 100 Albuquerque NM 87109. 505 798-2592 http://lawrencecastillo.