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Are You Planning for The Big Risks to Your Retirement? Thumbnail

Are You Planning for The Big Risks to Your Retirement?

Retirement Planning Stock Market Bear Market Inflation Finances and Planning for Women

When someone asks you about “risk,” what is your first thought?  To most people, their focus immediately turns to what can happen with their investments—especially in a year like this one.  But risk has many different elements, and some may be more perilous to your wealth than volatility.  

  •  0:00 – Intro
  • 0:24 – Disclaimer
  • 0:28 – Welcome, please like and subscribe
  • 0:54 -  Health Care Risk
  • 1:34 – Longevity Risk
  • 3:16 – Family Risk
  • 5:09 – Policy Risk
  • 6:49 – The Value of Planning – Asking the “what if” questions
  • 8:28 – Avoiding analysis paralysis
  • 10:19 – Final Thoughts
  • 10:54 - Outro

 Watch Now:  Are You Planning for The Big Risks to Your Retirement?

Items referenced in this video:  CNBC Article    Boston College Study

There are many types of risks you will face in retirement.  Most of the time, market risk draws the most attention.  There are other risks that you need to consider and some of them can be more problematic than short-term fluctuations in value.

 Health Care Risk

As we get older, we will likely face more health issues in our lives.  And these can add up to a significant amount.

  •  Medicare – Medicare is a strong program and it covers a significant portion of the health care costs you will face but it doesn’t cover everything.  There are deductibles, co-pays, and out-of-pocket costs.   Medicare Advantage Plans and Medicare Supplements can help cover this, but there are costs associated with those also.
  • Prescription Drug Coverage – Medicare part D, covers some drug costs, but not all.  It depends on the medicines you take and other factors.  It also has a premium outlay.
  • Long-Term Care – Some people will be faced with living their later years in a nursing home.   Others may need some form of care in their homes.  Either way, this can be a major expense that can have an impact on you.

Longevity Risk

People are living longer.   And most people underestimate how long they think they will live.  According to the Boston College research

  • Only 58% of men between the ages of 65 and 69 expect to reach age 80.
  • Just 64% of women between those ages expect to reach age 80.
  • Life expectancy tables show that 65-year-old men have a 66% chance of living that long and 75% of 65-year-old women will reach their 80th birthday.
  • For 69-year-olds, 70% of men and 78% of women will live to at least age 80.

 Living longer means your resources have to last longer.  It also means you have a higher risk for health-related risks.

Family Risk

This involves a significant change to you and your family that results in financial shock.  One of the first areas of family risk is Divorce.   According to Forbes, the divorce rate for couples over the age of 50 is the highest of any age group in the world.   “Gray Divorce” is something we may not expect to happen, but when it does, the financial impact can be significant.

The second area of family risk is the death of a spouse.  Not only is this an emotional issue, but it can also have an impact on your income.   Social Security benefits will be reduced.  If you are receiving a pension, that may also be reduced or eliminated.  It could place more strain on your retirement savings.

 The last part of family risk involves caring for kids and parents.  It is not uncommon for people in their mid-60’s to have both adult children and elderly parents.  Our parents could see their health fail, and require more care.  Our kids could lose a job or go through a divorce, requiring some assistance as well. Helping them could cause your spending level to rise to risky levels.  

Policy Risk

What happens in Washington DC or our State Capitols can have an impact on our finances as well.   The most obvious topic right now is Social Security.  Current projections show the Social Security system unable to meet it’s payment obligations in 2035.  This could result in a reduced benefit, higher payroll taxes or both.

Both of those scenarios, if they happen, could have a significant impact on almost every retiree.   A 20% reduction in income means you will depend more heavily on your retirement savings.

The Value of Planning

One of the biggest values of financial planning is asking the important “what if” questions.

  • What if you go to a nursing home? How does that impact your savings?
  • What if your Social Security benefits are reduced by 20% in 2035?
  • What if the stock market drops 50%?
  • What happens if your spouse dies too soon?
  • What if you have to pay the rent for your adult child who lost their job?

Our financial planning software allows us to ask those big “what if” questions and illustrates the possible outcomes should these kinds of problems happen.

 It is also important to remember, that you can suffer from paralysis by analysis.  Many of these situations may have a low probability.   And this is where we also can add value.   As planners, we add an unemotional and rational perspective to help you not overthink your situation.

Financial planning is also not just for wealthy individuals. Each one of us has different challenges.  The planning process is different for each person, but the value of a good plan can help you make good decisions and have better real-life outcomes.

Connect with a Planner

We have 10 financial advisors in 5 different locations.  You can connect with one to have a conversation about how creating a plan for your future can be beneficial to you.

Appearing in this video

Certified financial plannerMichael Seese, CFP®

Mike is a Certified Financial Planner Professional in Parkersburg, West Virginia.

Financial Consultant

Vince McManus

Vince is a financial consltant in Parkersburg, West Virginia

financial advisor

Neal Watson, CFP®

Neal is a financial advisor in Marietta, Ohio.