The Three Key Challenges of Retirement

Planning for your retirement can be challenging. It can be scary and frustrating. I have seen many clients who felt their plan was a disaster waiting to happen. As an advisor, I am here to say that you can handle it. Planning for retirement does not have to be difficult. In fact, it can be fun! But in order to achieve the retirement of your dreams, you must prepare for three major challenges that every retiree is likely to face.

Challenge #1: Ensuring a long retirement savings lifespan

One of the greatest fears that people have is that they will outlive their savings.
Fortunately, by taking the steps now, you can ensure that this doesn’t happen to you.
The first step is to budget your expected expenses based on your normal day-to-day costs and any activities you want to pursue during retirement. Things like travel, hobbies, remodeling your home, etc.

Next, take a hard look at your current savings and level of income. How much are you setting aside for retirement? How much more do you need to be saving or investing in order to meet your expected budget? This is where working with a financial advisor can come in handy, because an advisor can help you determine:

  • how much your savings need to grow to meet your needs,
  • how long you can expect your savings to last based on when you plan on  retiring, your general health, and activities,
  • how to maximize your income opportunities after retirement, and
  • what the ideal rate of withdrawal will be from any retirement accounts you have so you don’t run out of savings.

Once you have a plan for your retirement savings, you can move onto the next challenge:

Challenge #2: Planning for health care expenses

As we age, health care becomes a bigger concern, and a more difficult one to deal with. It can be hard to find a plan that provides the coverage you need at a price you can afford, all the politics and legislation affecting the health care industry don’t make it easier either.

The answer, again, is to plan ahead. Here are a few things you can do:

1. Learn about your Medicare options.
If you are one of the lucky few who will have employer-provided healthcare coverage even after retirement, congratulations. But if not, start familiarizing yourself with the intricacies of Medicare now. The Federal government’s health insurance program for seniors is often referred to as a single plan, but in reality it is many types of plans rolled into one. From the basic level of coverage (Part A), to “Medicare medical insurance” (Part B) which covers outpatient hospital care, physical therapy, and home health care, to the more elaborate “Medicare Advantage” plans, most retirees are confronted with too many options, some of which are more appropriate than others. Choosing the best type of coverage for you will be crucial when it comes to paying for your medical expenses.

2. Look at Medigap.
Medigap supplemental insurance is sold by private insurance companies and is designed to help pay those costs not covered by Medicare. Medigap isn’t free, and certain criteria must be met before you can purchase it, but it’s definitely a route to consider.

3. Consider long-term care insurance.
Important disclaimer: not everyone will need long-term care or assisted living in their lives. That said, many people do, and long-term care (LTC) insurance is one of the best ways to pay for it. It can be beneficial to purchase LTC insurance sooner rather than later, as premiums often grow higher as your grow older. However, LTC is expensive in and of itself, so give the subject a lot of careful consideration before making a decision.

As you can see, paying for health care expenses is a huge part of retirement. As you create your retirement plan, make sure that you give the subject all the attention it deserves.

Challenge #3: Planning for unexpected expenses

While health concerns are a major source of unexpected costs, there are many other types of expenses that could impact your retirement. For instance:

  •  Car repairs
  •  Your bills keep going up
  •  Household repairs

The point of all of this is to show that unexpected expenses can come at any time, in many different forms. What’s more, they canreally pile up! Which brings us to the single most important thing you can do to meet these three key challenges of retirement: Have you guessed what it is yet?
That’s right: PLAN AHEAD!

By being proactive, by starting now, you can mitigate these challenges and prevent them from derailing your dream retirement.

Let me know if you have any questions. I am here to help you.

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