By Marjorie L. Rand, CPA, CFP®, RICP®
You’re kicking back, margarita in hand, on some undisclosed tropical island, lying in a hammock near the beach. This is the way it’s supposed to be—retirement at its finest. You worked hard for this, and you are going to enjoy it! At least for a while, before retirement bliss is met with some retirement risk realities. Be ready for whatever life throws at you. Here are a few common post-retirement risks and how to prepare for them.
Medical costs are rising every day, and Medicare doesn’t cover a slew of expenses. It does not cover dental, eye care, or long-term care, and don’t forget about deductibles, especially for hospital stays. You have a couple of options when it comes to managing healthcare costs. A dedicated emergency fund with 3-6 months of expenses can help pay for unexpected medical costs that pop up; alternatively, you can purchase Medigap coverage through a private insurer to pay for expenses Medicare doesn’t cover.
Paying for long-term care is also a concern for many retirees. It’s best to obtain a policy while you’re healthy, as insurance carriers will not issue policies once you’re impaired. While the list of insurance companies offering long-term care policies is dwindling, there are still a few, such as New York Life, that issue these policies.
Family Member Crises
Family is the most important thing to you, and when someone requires assistance, of course you want to help. Whether it’s your son who lost his job or your cousin who just needs a helping hand, you want to be there for them. That’s why having an emergency fund is so important. You shouldn’t use your retirement savings on family crises; instead, tap into your emergency fund to help your family.
We can’t help inflation. The cost of goods will go up, it’s a given. But a proper asset allocation of your investments can help mitigate rising inflation. While your retirement funds should be conservatively invested based on your age, there should be a growth component to any portfolio. Good-quality stocks can keep up with inflation and lessen this risk.
Outliving Your Money
As medicine advances, people live longer, well into their 80s and 90s. If you retire at 65 and you live to be 89 years old, you’ll need 24 years of income. You can’t help living longer, so what do you do? Having a budget during retirement is essential to helping you outlive your money. Keeping track of all your expenses and income can assist in stopping you from spending too much.
Another risk variable is fluctuating market conditions. If last year taught us anything, it was to expect the unexpected, and having an appropriate asset allocation in place helps alleviate some of the stress of watching the stock and bond markets. A proper mix of stocks, bonds, and liquid investments is critical as you enter retirement. The allocation will change as you age. That’s why it’s important to review your investment portfolio on an annual basis.
We Can Help Mitigate Your Risks
You can plan for the unexpected post-retirement. Acquiring additional insurance, establishing an emergency fund, and having the right asset allocation can help you overcome some of the most common retirement risks.
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About MargeMarjorie Rand is founder and financial advisor at Rand Financial Planning, a comprehensive, fee-only, fiduciary financial planning firm. Marge specializes in helping her clients plan for a secure retirement and navigate life’s many transitions through customized, tax-efficient retirement planning. She is passionate about empowering her clients to make the best financial decisions for their life and being by their side no matter what life throws at them. Marjorie spent many years as a CPA before founding Rand Financial Planning so she could be a go-to source for all her clients’ financial needs and help them avoid costly mistakes. She has a bachelor’s degree in accounting from Rutgers University and a Master of Science in Taxation from Fairleigh Dickinson University, along with the Retirement Income Certified Professional® (RICP®) and CERTIFIED FINANCIAL PLANNER® (CFP®) designations. When she’s not working, Marge enjoys boating, horseback riding, traveling, and hiking with her husband and her dog, Rangeley. To learn more about Marjorie, connect with her on LinkedIn.
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