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Overcoming 5 Retirement Fears

June 30, 2021

We’ve all heard stories about people losing their retirement money in a stock market crash, outliving their money, or incurring unexpected medical expenses that force 80- year-olds back into the workforce. At times, these stories can seem overwhelming — even to the point of deterring people from planning for retirement. Are these fears likely to become realities? The truth is that they can happen. Are any of these your concerns?

Outliving Your Money

There’s a financial rule of thumb designed to decrease the odds of outliving your money over a 25-year retirement. By the time you’re ready to retire, the theory suggests that you should have saved eight times your annual salary. This is where starting early can be a lifesaver. To get there, gradually work up to it. For example, at age 35, it helps to budget for having one times your current salary saved, then three times by 45, 5 times by 55, and so on. For many, this plan wasn’t realistic at age 34 or 45, and their saving may be far less than this rule of thumb at each of the age thresholds. This is where we can provide tremendous value for you.

The amount of money you need to have saved by the time you’re ready to retire depends on a huge range of individual factors: What are your plans for retirement? How old are you? Will you still have a mortgage? Do you have long-term-care insurance? To truly decrease the odds that you’ll outlive your money, work with a qualified financial advisor to develop a robust retirement plan. Stick to the plan and revisit it often to help ensure the plan—and your spending—remains in alignment with your goals and your circumstances.

High Inflation

What if inflation went up to 12–14% like in the 1970s? What would you do? The Federal Reserve is saying that present-day high inflation is transitory. However, because it has happened before, you’ll want to be prepared. This is where an annual review of your financial strategy can be wise. In periods of very high inflation, you may need to adjust your investment strategy. It may be wise for your portfolio to include investments that move opposite each other—so when one asset class or subclass is down, another is up.

Unexpected Medical Expenses Before Retirement

Unexpected medical expenses you may incur while you are still working could totally derail your retirement. To prepare for them, it’s important to have insurance in place. Disability insurance can help to ensure that if you lose your income due to a disability, you will still be able to take care of your basic necessities. Life insurance will protect your family in the event of your death. This is especially important if your income was the key to your spouse’s retirement.

Unexpected Medical Expenses During Retirement

For most people, healthcare is one of the largest (often the largest) expenses incurred during retirement. There are a few ways to prepare for medical emergencies: private health insurance to fill the gaps in Medicare, long-term-care insurance, and rainy-day savings. For today’s retirees, Medicare takes care of most medical expenses. However, you’ll need savings to cover what insurance won’t — like copays and expenses exceeding your insurance limit. And just as you save before retirement for unexpected expenses, ideally, you should continue your rainy day fund in retirement. Even if you are adequately insured, copays can be significant if you have a medical emergency.

Market Crash

As with high inflation, the key to surviving a market crash often is diversification. (To be clear: there is no way to insulate yourself completely from the effects of economic turmoil. But you can take steps to help ensure that turmoil doesn’t completely ruin your retirement plans.) This is an area where we can make valuable, personalized recommendations for you.

Need guidance planning for your retirement? Investment Answers is here to help.


Copyright © 2021. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the subjects discussed but should not be regarded as a complete analysis of these subjects. Professional advisers should be consulted before implementing any options presented. No party assumes liability for any loss or damage resulting from errors or omissions or reliance on or use of this material.