Retirement should be a time of relaxation and enjoyment, but for many retirees, financial concerns loom large. From outliving savings to navigating market volatility, inflation, and rising healthcare costs, today’s retirees face a complex landscape that requires thoughtful planning. Fortunately, with diligent planning and the right strategies in place, retirees can better prepare for the road ahead and protect their hard-earned savings.
The 6 Main Financial Concerns
A primary worry for many retirees is running out of money, particularly as longer lifespans stretch their savings. To bolster retirement funds, consider making catch-up contributions to tax-advantaged accounts, delaying Social Security payments for higher monthly benefits, or purchasing an annuity to provide a steady income for life.
The stock market’s volatility is another major concern. A bear market just as you’re retiring can pose serious risks to your financial security. To mitigate this risk, maintain a diversified portfolio — especially as you approach retirement. Adding bonds to your portfolio can reduce volatility, and high-quality government bonds offer additional stability.
Inflation is also a significant challenge, particularly for those living on fixed incomes. Without cost-of-living raises from a job, rising prices can erode your standard of living. While Social Security provides annual cost-of-living adjustments, you might also consider investing in Treasury Inflation-Protected Securities or Series I savings bonds, both of which are adjusted for inflation. If you continue to invest in stocks, focus on long-term growth, and try to ride out market fluctuations.
Changes to public policy, such as adjustments to taxes, Social Security, or Medicare, can further impact retirement security. Unexpected shifts in these programs may reduce benefits or increase costs, adding to financial strain.
The death of a spouse can create financial challenges. Losing your partner may reduce pension benefits and make it harder to pay monthly bills. Medical bills and funeral expenses can also add up. Life insurance and survivorship benefits from a pension plan can provide some financial relief in these situations.
Health and long-term care expenses are another concern. Rising health insurance premiums and the possibility of needing to move into a care facility can strain finances. Long-term services and supports — such as part-time aides, live-in nurses, or assisted living facilities — often contribute to financial shortfalls. If possible, buy long-term care insurance.
Financial Planning is key
Understanding how your savings can be affected by these risks is essential, especially given that you don’t know how long your retirement will last. Some retirees spend more years in retirement than they did in the workforce, making careful planning critical to maintaining financial security. By planning to cover the costs that will spike, you will have gone far in allaying any anxiety.
Working with a financial adviser who sees the whole picture will help you feel more secure; they will assess your financial picture, figure out how much you need, and plan your draw-down strategy to avoid running out of money.
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