What Are the Biggest Risks to My Retirement?

DEWITT, Mich. - Feb. 11, 2020 - PRLog -- You saved for years, made sacrifices and finally achieved your goal of retiring. Nothing can get in the way of your dreams now, right? Hopefully. But life isn't always that simple. Here's how to get ahead of some risks you might face in retirement.

Risk: Outliving your money

• Not taking too much from your investments - We typically recommend an initial annual withdrawal rate of 4%, with a 3% increase each year for inflation. However, the longer you expect to live, the lower that rate should be.

• Considering annuities with lifetime income benefits - Depending on how much you rely on your portfolio for income and your spending flexibility, you may want to consider annuities that guarantee an income payment for as long as you live.

Risk: Unexpected health care costs or a need for long-term care

• Considering supplemental coverage - Medicare Supplemental Insurance (Medigap) or Medicare Advantage (Part C) may help fill in the gaps for items that Medicare doesn't cover.

• Budgeting for long-term care costs - Even if you don't anticipate needing nursing home care, you should still consider planning for some type of assisted living or home health care costs.

• Putting your wishes in writing - Powers of attorney, health care directives and living wills can help you outline your wishes for future care. Work with your tax and legal professionals to create these legal documents.

Risk: Market declines and inflation

• Staying diversified - No one can predict the financial markets, but knowing how much risk you are willing – and able – to take as well as having a properly constructed portfolio can help you prepare. This includes keeping your focus on your long-term goals, not on short-term fluctuations

• Assessing your risk tolerance - Determine how much risk you are willing and able to take, so you can be better prepared to stay on track during the inevitable short-term declines.

• Being flexible with your spending - If you have the ability, don't automatically take more from your investments each year for inflation—especially during years when the market doesn't perform well.

Risk: Personal liability

• Umbrella liability insurance - This protection is designed to kick in when coverage on other policies, such as home or auto, has been exhausted.

How we can help
There are other risks to consider when it comes to your retirement. But your financial advisor can walk through different scenarios with you to stress-test your strategy to make sure you stay on track—even if one of these risks becomes a reality.