INCOME MATTERS – VOLUME 2
Special Retirement Planning Bulletin
Financial Challenges That Drain Savings
Most of us understand that the money we save for retirement will be gradually spent to help maintain our post-retirement lifestyle. What we often don’t realize is that there are many ways savings can be spent long before you want it to, leaving your savings depleted while you still need to rely on it.
Let’s take a few minutes to review some of the expenses that can quickly drain your savings during your retirement.
AARP reports that a 65-year-old couple that retired in 2013 will spend $240,000 on medical expenses throughout their retirement, and that number is only going to rise. With high medical expenses coming at you quickly, how will you protect your nest egg? Remember, too, that each time you make a payment for a medical procedure, the amount you withdraw no longer earns interest, further impacting your ability to grow your savings and thrive.
Conservative savers often think that if they put their money in a fixed product, they are safe from risks, but that couldn’t be further from the truth. With inflation’s historical average rise of 3 percent and most “safe” investments earning less than that, fixed investments can easily undermine your ability to support yourself throughout retirement.
For more aggressive growth—or even just to keep up with inflation—you might consider having a portion of your savings invested in stocks, ETFs, mutual funds and so on. But when you do, you’re exposing yourself to market risks. If the value of your holdings drops right when you have to sell in order to access cash to live, you’ll be forced to accept losses that can sabotage the rest of your retirement.
Even retirees can’t escape emergency expenses that crop up at the worst times. Whether you own a home or a vehicle or both at retirement, you could be facing major expenses to repair or maintain your property. If you manage to escape property ownership, you may still have major expenses if you’re ever forced to temporarily evacuate your apartment, travel to visit a sick relative or friend, or help a loved one out with their own financial problems.
This article isn’t meant to scare you—but to empower you. Because once you understand how insecure your position is when you’ve focused solely on savings rather than income, you can start the process of income planning, which will give your retirement the security and reliability you need.
In the next installment of the INCOME MATTERS series, we’ll talk about all the different risks you’re exposed in various investments and ways to help minimize those risks. For more information about retirement planning, be sure to check out our retirement planning services or contact us for more information.