working

4 Common Personal Retirement Risks to Look Out For

Share on facebook
Share on twitter
Share on linkedin
Share on email

Saving up for a comfortable retirement takes a lot of planning and foresight. No matter how in-depth your retirement plans are, however, you could still encounter unforeseen scenarios that would cause you to change or adapt them to the situation. Fortunately, there’s a way to protect yourself from these risks. Learning about what you’re up against and putting the proper safety nets in place will allow you to retire with little to no issues.

Here are common personal retirement risks you can prepare for with the aid of a retirement financial service:

Longevity Risk

Running out of money and outliving your assets are two of the most common concerns you should look out for. Without a proper plan in place, some individuals struggle with finding the right balance between being frugal with their spending in early retirement and indulging themselves in their preferred lifestyle.

Consider conducting research on various financial institutions that offer annuities and eventually getting one for yourself. These generate revenue by investing the clients’ funds for them. They are also considered to be one of the most popular income streams for retirees.

Annuities come in two phases. The first phase, accumulation, refers to the period where regular payments are made on insurance premiums and other sources. Following that, you will then begin receiving your payments during the annuitization phase

Unforeseen Needs

Accidents and emergencies may happen, and they may require more long-term care than you initially anticipated. Make sure you review your family history to give you an idea of possible health-care risks you may need to face. On that note, set aside time for estate planning in the event that you will still be providing for adult children or any family members.

Generally speaking, it’s best to aim for a higher overall savings amount. Purchase long-term care insurance in your fifties as you may lose the option to do so if you are diagnosed with certain medical conditions. You may look into acquiring a Health Savings Account (HSA). This can be likened to a regular savings account, however, it will only be accepted for medical expenses. You can use this as a reserve plan for expenses Medicare doesn’t cover.

Change in Marital Status

Given that rent or mortgage, utilities, and the majority of household expenses are shared, living together ultimately lessens the expenses of a couple. For this reason, the separation of cohabiting couples and the divorce of married couples can lead to fiscal issues for both sides. Divorce also comes with legal fees and other immediate costs and consequences that you may not be actively thinking about. Other examples include childcare, reduced credit, changes in tax brackets, and more.

Remarrying or operating within blended families can change your relationship with money as well. Discuss the situation thoroughly with everyone involved so you could all come to an agreement. Identify any new and preexisting responsibilities you may have, such as paying for a child’s education, joint insurance coverage, and more.

man writing with a woman

Consider obtaining a spousal trust to defer capital gains taxes that may put unnecessary weight on your spouse and vice versa. You or your spouse may also set up a Spousal Lifetime Access Trust (SLAT) which can be accessible by the other party (and sometimes children and grandchildren) right away. The funds taken from this trust may be used for a variety of purposes.

Death of Your Spouse

Losing a spouse and the grief that comes along with it not only causes drastic changes in your mental and emotional wellness but your financial state as well. Depending on the cause of death, you may find yourself in the midst of more additional monetary obligations such as hospital bills and other debts. Double-check with your pension provider as well, since the death may have resulted in a loss of benefits.

Explore ways to help alleviate these burdens. Some retirees may choose to work part-time or full-time to further contribute to their financial stability. You may find employment more difficult to acquire making it a less viable option, however. As an alternative, you can look into survivors’ pensions and life insurance policies.

Other Risks

The risks mentioned above are only personal in nature. For a more holistic approach to retirement planning, it’s best to consider other types of risks as well, such as those focusing on economics, politics, healthcare, and retirement income planning. This way, you can prepare for setbacks to your plan.

Planning for your retirement properly may seem a little daunting, but it isn’t impossible. Create a fiscal priority list first and foremost. Then take it one step further and evaluate your current lifestyle.  Having a clear view of your current financial situation will allow you to make better decisions towards achieving the monetary goals you set for the future.

Scroll to Top