As I mentioned in part 1 of this multi-part blog post, simply saving for retirement isn’t enough. There’s a myriad of things that can go wrong in retirement. And you MUST be prepared. Preparedness is the key to many of life’s challenges. Unfortunately, many simply “put off” planning for another day. Days turn into weeks, weeks into months and months into years and before you know it, BOOM, retirement is right around the corner. And you’re not ready. This bring me to our first and most important retirement threat:
Neglecting to prepare, either on your own or with a retirement specialist, a comprehensive plan that addresses all the potential threats and risks we all could face in retirement, as well as your income needs and income projection. Will you have enough to last throughout retirement and how will you fund the emergencies of retirement? Her Retirement offers a full “Are You Ready” assessment to determine any gaps in your plan, or to create a plan for you.
Here’s 5 other threats to consider. We’ll cover several more in part 3 of this blog series.
- Death of a spouse (without life insurance). While it’s true many pre-retirees are over-insured, the opposite is true as well. Life insurance is certainly critical while you still have a mortgage or other debt obligations, as well as young children to support. But we also feel that you do need life insurance as you are nearing retirement. The threat is that you or your spouse could die without insurance and you would need to take from your retirement savings to cover your living expenses. More than 2 in 5 Americans say they would feel a financial impact within six months of the death of a primary wage-earner, according to a 2015 report from the industry group LIMRA and the nonprofit group Life Happens. In addition, 30% of Americans think they don’t have enough life insurance, the report said. Term life insurance policies can be aligned with your retirement age so that it can cover you and your spouse during those important wage earning years and replace the earnings in the event of a pre-mature death of either partner. Her Retirement offers a full life insurance assessment to determine if you’re under-insured or over-insured, and then we can help match you with the right insurance based on your circumstances.
- A healthcare crisis. Unfortunately, medical debt is a leading cause of bankruptcy for many. For those that can afford to cover illness or medical emergencies with their savings, it can prevent you or your spouse from working in the final stretch before retirement. In addition, covering these expenses significantly impacts your retirement nest egg. There’s several types of insurance to consider including disability insurance and long-term care insurance. Her Retirement offers a long term care/medical insurance assessment, as well as some unique ways to fund these expenses outside of insurance.
- Scams and more scams. Retirees are a big target for scammers. We’ve all heard the nightmare stories. These scammers take advantage of people’s fears. A perfect example are life insurance policies marketed at 702 retirement accounts. Scammers will sometimes use early retirement seminars as a forum to sell these policies. Financial Industry Regulatory Authority (FINRA), the industry oversight organization, advises buyer beware for any scheme or program, like these that promises unrealistic returns of 12% or more, as well as anything promising that you can retire early and/or make more money in retirement than you did in your working years. Here’s a link to the more scams and how to protect yourself and your loved ones
- The kid(s) that come back. Some call these boomerang children. Just when you think you have an empty nest, some one of them or worse yet, all of them return! I just experienced this myself with the return home of my 24 year old son. While a part of me was excited to have him in the house again, the other part of me was calculating the cost to have him back home. Many pre-retirees continue to support children who are considered adults. According to the March 2015 study by Hearts & Wallets, an investment and retirement research firm, those 65 years or older with financially independent children are more than twice as likely to be retired than people of the same age group who financially support their adult children. That’s because those who are still supporting their kids are often putting off retirement to do so,said Hearts & Wallets co-founder Chris Brown. Ideally, we want to help our children become independent from the get go so they can avoid ending up on your doorstep, but we know this isn’t always the case, especially in these times. My son attended one of the best colleges in the world and he’s in my spare bedroom as I write this. The best way to protect your retirement savings from the kids that come back is to help them get financially independent as quickly as possible and ask for them to pay their fare share of the household expenses. Read these tips for surviving your child’s return home (I think I need to read this a couple times!)
- Giving grandma a hand out and a hand up. The statistics are pretty convincing that baby boomers are caring for their aging parents and giving up some of their retirement savings in the process. My mother used to say, “I never want to be a burden to my children.” And so far she hasn’t been a burden at all. But, she was properly prepared and to her credit worked as a teacher for 35 years and has a good pension and a good medical plan. Some 11% of adult children under 65 provide financial assistance to their parents, according to the National Institute on Aging’s 2015 Health and Retirement Study. Further, 25% of adult children under age 65 help parents with things like chores and personal care, often at the expense of having their own paying job. In fact, people age 50 and older who care for parents lose an average of $303,880 in pay, Social Security and pension benefits, according to a 2011 MetLife report! Here’s some resources for caring for your elderly parents
While it’s unrealistic to avoid these and many other retirement threats, it’s best to consider what you may face just before retirement and in retirement and make sure you have a Plan A…and a Plan B. This plan, as we discussed above, needs to include not just you, but your spouse and your entire family.
To chat about your plan with an affiliated advisor, please request any one of our assessments here.