Does Your Financial Strategy Take Into Account Unforeseen Retirement Challenges?
Benjamin Franklin once said, “By failing to prepare, you are preparing to fail.” However, when it comes to planning for retirement, it may not be a bad idea to develop a strategy that takes into consideration unexpected challenges that could arise.
An unanticipated scenario in retirement might include a major medical issue, debilitating illness, or an adult child moving back in after a job loss or even returning home with grandchildren in tow after a divorce. Many people create an income plan for retirement’s best-case scenario, but it may be a good idea for them to consider what may happen to their retirement income if a challenging situation were to arise.
Perhaps a better approach would be to create a strategy for potential obstacles. That way, if you happen to make it through retirement with no unexpected financial issues, you could potentially be able to leave a larger inheritance for loved ones.
[CLICK HERE to read the article, “Retirement Living: Biggest Retirement Regrets,” from USA Today, March 11, 2014.]
[CLICK HERE to read the article, “Elderly Baby Boomers: With Fewer Children and More Divorce, Who Will Take Care of them?” from PennLive, July 1, 2014.]
Planning for retirement can comprise more than just a retirement nest egg. In addition to working with a financial professional, you may want to consider speaking with a qualified tax advisor or an attorney to provide you with proper tax or estate planning and develop a strategy that is appropriate for your unique situation. With a strategic, clearly defined retirement income plan in place, you may be able to avoid some common retiree mistakes, such as premature IRA withdrawals or not retiring to a more tax-friendly locale (e.g., some of the more traditional retirement spots, like Florida and Nevada).
[CLICK HERE to read the article, “Raiding Savings Can Hurt Your Retirement,” from Vanguard MoneyWhys, Aug. 1, 2014.]
[CLICK HERE to read the article, “These States Have No Income Tax,” from USA Today, April 26, 2014.]
Another reason a retirement income plan can come up short is because both spouses are not engaged in the process. Many women manage household expenses and are sensitive to prices, inflation and their own longevity. Perhaps this is why, despite the fact that they earn less on average than men, women are catching up when it comes to retirement savings. A recent survey found the average retirement savings balance for women was up 17 percent from a year ago and up 71 percent from 2009. Nationwide, average salary deferral rates are 5.37 percent for women and 5.70 percent for men. But interestingly, deferral rates for men have been declining since 2010.
[CLICK HERE to read the article, “Women Showing Greater Retirement Plan Engagement,” from PlanSponsor, Aug. 27, 2014.]
Another scenario people may not plan for is divorce at an older age. Although the strategy may sound wrong and immoral, the story of one pending Medicaid recipient demonstrates why divorce can help reduce medical bills.
[CLICK HERE to read the article, “Divorce Due To Medical Bills? Sometimes It Makes Sense,” from Forbes, Aug. 21, 2014.]
[CLICK HERE to read the article, “Can You Collect on Your Ex? Social Security Eligibility after Divorce,” from BlackRock Blog, July 14, 2014.]
What can each of us do now to help prepare for the unexpected in retirement? You may consider spending and borrowing less and saving more. The tendency to overleverage during high-income years can be tempting. We convince ourselves that because we work hard and earn a good salary, we should be able to drive an expensive car and take lavish vacations. Perhaps we can afford that during our high-earning years, but should we continue to live “high on the hog” if it could potentially diminish our lifestyle in retirement?
Think about adapting your lifestyle today in a manner similar to how you would like to live in retirement — and consider whether you’ll be able to retain that lifestyle once you’re no longer earning a paycheck. If we can help you develop a strategy to address the possibility of an unfavorable scenario occurring during your retirement, please don’t hesitate to call.
Our firm assists retirees and pre-retirees in the creation of retirement strategies utilizing insurance products. Our firm is not permitted to offer, and no statement contained herein shall constitute, tax, legal or accounting advice. Be sure to speak with qualified professionals before making any decisions about your personal situation. Our firm is not affiliated with the U.S. government or any governmental agency.
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