When you visualize your retirement, what do you see? If you’re still far away from that milestone, your vision might remain a bit nebulous. For many individuals, the picture only grows clearer with time and detailed planning.
But even the best laid plans are not immune to derailment. Sometimes, the best way to prepare for the future is not only to imagine what could go right, but to be aware of what could go wrong.
- Ignoring Inflation: Inflation can be a sneaky and dangerous foe to retirement income if not hedged against properly. In recent years, we have experienced a relatively low rate of inflation hovering around 2-3% annually, but even this seemingly low rate of change will erode your purchasing power if savings aren’t keeping pace. At just a 2% inflation rate, $1 million in today’s dollars will be worth just about $670,000 twenty years from now.
- Over-supporting Adult Children or Family Members: In the nearly 30-year history of our firm, this is one of the more common factors we see sabotaging retirement success. So often, retirees don’t even realize how much the financial support they have provided their children or other family members “adds up to.” In such circumstances, we are dedicated to helping clients face hard facts. While it is always the client’s choice regarding how to spend their hard-earned money, our job is to help them understand the consequences before it is too late to make a different choice.
- Underestimating Longevity: If you run out of savings deep into retirement, you might not have many options to make up for it. Begin your retirement planning with a realistic estimate of how long you might live. If long lives run in your family, we encourage a conservative estimate that extends beyond average life expectancy. If married, the chances are even higher that one of the two will live well past average life expectancy. Unless a client has specific health risk factors that argue to the contrary, we believe in building a plan to has enough “cushion” to fund a long life regardless of what happens with health care costs, taxes or inflation.
- Not Properly Planning for Health or Long-Term Care Needs: Healthcare costs are among the fastest rising expenses for retirees and show no signs of slowing down. It can be hard to imagine needing nursing home care when you’re still in your sixties and thriving, but the reality is that 52% of individuals turning 65 will need some type of long-term care services in their lives and 14% of them will need it for longer than five years. Long-term care insurance policy premiums only increase in price with age and many wait until it’s too late to obtain a policy at all.
- Not Accounting for Market Risk: A well-built plan needs a portfolio that provides both income and a growth rate high enough for your standard of living to keep pace with inflation. The right mix is different for every client, since everyone’s situation is unique. But whatever the mix of income and growth your plan calls for, it is just as important that it fits within your personal risk appetite. If you can’t tolerate the market ups and downs of the portfolio that you need in order to meet your goals, then something has to give. An important part of our work is helping clients understand the level of market exposure and risk that is right for them, and any lifestyle tradeoffs that may come with that choice.
Retirement planning can be tricky with so many moving parts to align for success. With so much riding on the details, don’t you think you could benefit from a second opinion?
Contact us today to learn more about our Retire-ReadyFIT™ process which works to identify potential areas of weakness in your plan and prepare you for a financially secure retirement.
At Atlanta Financial, we understand that retiring can be overwhelming and confusing, but it doesn’t have to be. Atlanta Financial’s Retire-ReadyFIT™ program is a comprehensive approach to planning for your retirement. We take a look at your entire retirement picture and help you fill in the missing pieces. We guide you by incorporating all the key components of retirement and establishing a plan of action to help you systematically navigate the transition into your best retirement.