10 Retirement Risks You Should Plan For – Part 2

Editor’s Note: This is Part 2 of a two-part series on retirement risks that we should definitely plan for. For more information on retirement money mishaps and how you can enjoy a comfortable retirement lifestyle, you may find helpful answers in The New Retirement Report. 

In the first half of this series, we discussed 5 of the 10 Retirement Risks you need to plan for. With apologies to the Late Night Show and Late Show, no Top 10 List would be complete with a stop at the halfway point. So, without further ado…. Here are 5 other retirement risks that retired and working-age investors should definitely heed.

As you read through this list, you may want to consider the strategies your plan has to manage these risks. If you are unsure or would like more confidence in your plan, a retirement-knowledgeable financial professional can help you. Their guidance can help identify potential financial gaps, clarify your needs, and solve for those shortcomings.

Retirement Risks to Watch Out For

Without further ado:

#6: Healthcare & Long-Term Care Cost Risk

Research data indicates healthcare and personal care needs will be a great cost burden for future retirees. To put this in concrete terms: A couple retiring in 2017 would need an estimated $275,000 to cover health care costs in retirement, according to Fidelity. That’s a 6% increase over 2016.

This estimate relates to those with traditional Medicare insurance coverage and considers premiums, co-payments, deductibles, and out-of-pocket drug costs. It excludes the cost of a nursing home or any long-term care (LTC) that might be needed.

And long-term care might well be the most bitter—and expensive—pill to swallow. The Genworth Cost of Care Survey in 2021 found these monthly median costs for long-term care:

• Home Health Care Homemaker Services – $4,481
• Homemaker Health Aide – $4,576
• Assisted Living Facility Private, One Bedroom – $4,300
• Nursing Home Care Semi-Private Room – $7,756
• Nursing Home Care Private Room – $8,821

#7: Tax Burden Risk

Long-range tax strategizing will be especially crucial if you’re counting on tax-deferred accounts (think of traditional 401(k) and 403(b) accounts, for example) for income in retirement. Withdrawals from these accounts will be taxable as ordinary income. Having too many funds wrapped up in tax-deferred accounts could mean a huge ‘tax time bomb’ later on, especially when you will have to start taking required minimum distributions.

This may be a higher risk for those desiring a high-end lifestyle in retirement. It’s likely they will need more income to match their spending goals. Talking with a financial planner about income diversification and tax efficiency can help solve this situation.

You can keep more of your hard-earned money for yourself and sidestep sending an excessive proportion of it to Uncle Sam. That’s helpful especially in the times when you need it most.

#8: Survivorship Risk

Losing a spouse is itself a sad event. It can be compounded exponentially with new circumstances ensuing from a partner’s death. The resulting loss in income and benefits can greatly impact the financial well-being of the surviving partner. This personal loss can also bring a financial burden of lingering medical debts.

Because there are many factors that affect the financial strength of the surviving spouse, you and your partner should run the scenarios of each of you going first, so you’ll know what to expect. And, more importantly, what you can change now to achieve your desired outcome.

Consider life insurance, survivors’ pensions, well-planned Social Security maximization strategies, and long-term care insurance to protect the income and needs of survivors. Estate planning is also key to include in a retirement plan for couples.

#9: Senior Fraud & Abuse Risk

Knowing that, when you are at your most vulnerable, someone could target you for fraud is a sickening thought. Yet The True Link Report on Elder Financial Abuse reveals that seniors lose $36.48 billion each year to elder financial abuse. That is more than twelve times what was previously reported. The report’s findings include:

• Small losses are evidence of an underlying vulnerability.
• A senior who lost as little as $20 in a year to exploitation could be expected to lose $2,000 a year to other types of fraud.
• It is estimated that 954,000 seniors are currently skipping meals as a result of financial abuse.

There are steps that can be taken to guard against this risk. Be aware that people of retirement age and beyond are at risk from strangers, and possibly even close friends. Develop good fraud detection and countering habits, such as being skeptical of unsolicited offers and doing thorough research on them.

When being solicited, it’s helpful to request those offers be sent in writing via the mail. Work with loved ones and teach them as well as yourself to be on the lookout for warning signs of fraud. Finally, carefully safeguard your information, especially details like your Social Security number, credit card information, and other personal information at risk for abuse. 

#10: Lifestyle Risk

You know what more free time means? It means more time to spend, travel, and pursue your passions. Your neighbors are taking a cruise down the Seine? Who would want to miss that? Bon voyage! Your granddaughter is competing around the world in ice dancing? How can you miss even one competition?

You deserve to enjoy retirement. You just need to plan for what level that enjoyment might reach and plan for how your priorities could shift. Along with the expenses of travel goals and other lifestyle-related spending, map out what your monthly living expenses will be. Then you start determining what sort of income and cash-flow you will need — and how you will put your accumulated financial resources to work for you.

#11: (Bonus Risk) Not Taking Action Now

The Risks and Process of Retirement Survey, courtesy of the Society of Actuaries, found most pre-retirees currently don’t consult with a financial professional. But retirees report a moderate amount of interest and pre-retirees a high amount of interest in receiving support and education on a variety of finance-related topics.

If you are interested in working with a financial professional, verify their expertise, planning specialty, and background are a good fit for you. They should offer guidance and products that are in your best interest. You might want to confirm how they will fulfill that mission to you.

Confident Futures Start with Planning Today

If you would like help from a professional who can guide you, SafeMoney.com can assist you.

Use our “Find a Financial Professional” section to connect directly with a financial professional. You can request a personal strategy session to discuss your needs and goals. Should you need a personal referral, call us at 877.476.9723.