As you plot the course to a happy and successful retirement, you’ll be navigating through a sea of financial risk. Whether you have a trusted wealth adviser or you’re sailing alone, there are many financial hazards to avoid in order to get to your retirement port safely.
When you’re concentrating on managing the financial risks associated with inflation, interest rates, and general portfolio performance, it’s easy to overlook the devastating effects other risks on your retirement goals. These include:
Pre-retirement setbacks. The ten years leading up to retirement are often the most busy and productive earning years of your career. As your income starts to peak and your kids’ college expenses are finally gone, you can fully concentrate on funding your retirement. Statistics indicate that a third of married couples will experience a major medical condition with a spouse or have to help with the care of a parent, as reported by the Urban Institute in 2006. Other shocks that can derail plans include unemployment and the death of a spouse. These kinds of challenges often result in premature retirement, which can negatively affect retirement savings and associated goals.
Healthcare costs. Everyone is concerned with the escalating costs of health care. Thanks to medical advancements, we’re living longer and surviving health issues that would have killed us in the past. So it’s no surprise that we are spending more on healthcare in retirement than ever before. To add to the problem, there is much consternation surrounding the funding of Medicare as our nation wrestles with a massive deficit and decreasing reimbursement of medical care during retirement.
Chronic care costs. Chronic medical care accounts for more than 75 percent of healthcare dollars spent in the America. For those of us who are 65 and older, 60 percent of men and 80 percent of women will need chronic care in their lifetime. The facts are staggering: Over 70 percent of the people who need chronic care are cared for at home by a family member, not in an assisted living or nursing home. One of the greatest fears of seniors today is losing their independence and becoming a burden to their children. Unfortunately, many people enter a nursing home not because they are disabled, but because they no longer have a caregiver at home.
Longevity. Someone turns 50 every eight seconds! Ten years ago, America had 35 million people over the age of 65, and that number is projected to double over the next 20 years. We’re living longer, and many of us are worried about outliving our money! USA Today reported in March that life expectancy at birth increased to a new record of 78.2 years in 2009, and the trend is growing. The impact of a longer lifespan is far reaching and will affect our taxes, politics, healthcare, employment, entertainment, housing, and retirement options.
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Widowhood. It turns out that marriage is very good for your health and contributes to a longer and happier life. A recent study by the American Journal of Epidemiology found that the risk of death was 32 percent higher across a lifetime for single men compared to married men, and single women faced a 23 percent higher mortality risk compared to married women. The loss of a spouse is often devastating both emotionally and financially. Currently, there are almost 14 million widowed persons in America, and approximately 80 percent are women. Married individuals face a 75 percent chance of being widowed for five years or more, and almost half will be widowed for ten years or more. Women have a greater chance of becoming the surviving spouse and often have fewer savings, lower Social Security benefits, and smaller pensions. But the greatest hardship may be the loss of a caregiver if the surviving spouse becomes ill.
Non-financial events are a reality and can have a disastrous effect on the quality of our lives and retirement years. We may not be able to avoid the events referenced above, but there are a growing number of new and developing insurance strategies that allow people to protect themselves and their families from the financial costs associated with non-financial events. For assistance in this area, be sure to contact a financial planner or CFP®.
Dean J. Catino, CFP®, CPRC, is a managing director and cofounder of Monument Wealth Management in Alexandria, VA., a full-service investment and wealth management firm. Monument Wealth Management is backed by LPL Financial, an independent broker-dealer. Securities and financial planning offered through LPL Financial, a Registered Investment Advisor, member FINRA/SIPC. Monument Wealth Management has been featured in several national media sources over the past several years. Follow Dean and Monument Wealth Management on their blog Off The Wall, on Twitter at @MonumentWealth and @DeanJCatino, and on their Facebook page. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for individuals. To determine which investment is appropriate please consult your financial advisor prior to investing.