Take a moment to imagine how your retirement years look.
How old are you? Where are you living? What would you like to do during your golden years? For how long and in-depth will you oversee your company’s affairs before handing the reins to your successor?
Those answers floating around in your mind—those are goals.
We want to help you reach those retirement goals by identifying and overcoming some common risk factors, like:
- Life-span
- Health
- Inflation
- Stock market health
- Spending
With these tips, you can better enjoy your retirement years.
1. Life-span
We’re living longer than the generation before us. Just because your parents or grandparents lived into their 70s or 80s doesn’t mean your life span will be the same.
According to the Social Security Administration, one out of three 65-year-olds today can expect to live to about 90 years old. Taking into account the average retirement age of 62, as reported in the Employee Benefit Research Institute’s 2023 Retirement Confidence Survey , it’s reasonable to assume that many people will spend 25-30 years in retirement. That’s a lot of years to live with no new income.
2. Health
Health typically declines in later years. That translates into more trips to the doctor, hospital stays, testing, procedures, medication, etc. Out-of-pocket health care costs and health insurance only add to expenses. In addition, you may have to hire a live-in healthcare worker or move into an assisted living facility or retirement community.
3. Inflation
The longer your retirement years, the more inflation impacts your savings. You can check out CPI’s inflation calculator to see firsthand how escalating prices affect your nest egg.
To better understand its impacts, consider the cost of a loaf of bread in 1993. According to the Bureau of Labor Statistics, the cost of bread has increased by over 181% since 30 years ago. And remember, your retirement could last that long.
4. Stock Market Unpredictability
The stock market is complex and unpredictable. It can be up, down, and all over the place confusing. As you near retirement, you don’t want a sudden market downturn to wipe out your savings—you’ll have little-to-no time to wait on a market recovery. You also don’t want to invest so conservatively that your investments don’t keep up with inflation.
5. Spending
The amount of money you pull from your retirement savings accounts is also known as “drawing down” or “withdrawal.” It’s vital to compare your known spending against your savings and investments. Prepare for unexpected costs that come up, like medical.
Turning Obstructions Into Opportunities
It isn’t possible to foresee every future need. No one can predict how long you’ll live, how your retirement will play out, or how healthy you’ll remain in your older years. However, you can take the following steps to improve your retirement strategy.
● Invest Like You’ll Live to 95
Make wise investment decisions today to improve the odds your money doesn’t give out before you do. That means aggressively investing while you’re young and gradually moving to more conservative means as you age.
Also, take advantage of your employer’s Roth 401k plan or a Roth IRA. Either “vehicle” lets you withdraw your money tax-free at retirement. Then, make a game of contributing. What “nice to haves” can you do without today to live better years from now?
● Delay Social Security Claims as Long as Possible
Try not to claim Social Security funds until you’re at least 70 years old. Claiming at 70 versus the median age of 62 will earn you 76% more in your monthly checks from the Social Security Administration. That’s a rate of return you can’t match anywhere else.
Strategizing and succession planning for business owners can help you achieve this ambition.
● Eat Healthy and Exercise
Fitness advice might seem like unconventional financial guidance. Like any proper monetary investment, investments in your health compound like a snowball rolling downhill.
Begin now with eating lean proteins, lots of vegetables, and fruits. Get your heart pumping several times a week with cardio exercise. Build strong muscles and bones with resistance exercises. Give your body the water it needs. It will repay you richly as you grow older. Your best hope for having fewer costly health concerns and the ability/mobility to enjoy your retirement years is to take good care of your body.
● Protect Your Stock Market Investments
Investing boldly now and gradually moving that money to more conservative investments may sound easy enough. However, most people tend to “set it and forget it,” not rebalancing their portfolios or shifting to investments shielded from stock market downturns. Hire a certified public accountant (CPA) to advise you on your personal wealth planning and remind you when to shift funds.
● Control Spending
You won’t have additional paychecks coming in during retirement, so it’ll be more important than ever to compare what you have against what you plan to spend. Accountants (CPAs) can help you budget and plan your drawdown strategy. They can tailor a game plan to you based on factors like your age, risk aversion, and liquidity.
Understand Risks to Avoid Them
Understanding the risks that could impact your savings is essential to ensuring a comfortable retirement. These risks include factors such as your health and potential life-span, inflation, market volatility, expenses, and withdrawal strategies. Developing a comprehensive retirement plan that accounts for these risks can help you stay on track to reach your retirement goals.
Infographic
To achieve your retirement dreams, consider key factors: People live longer, demanding careful financial planning for extended periods. Health costs rise with age, impacting savings. Inflation erodes purchasing power. Market fluctuations pose investment risks. Managing expenses is crucial. Create a solid plan: diversify investments, delay Social Security, prioritize health, and seek financial guidance. Proactive management enhances retirement security.
