Beware of These Top 5 Retirement Risks

​If you're close to retirement or have already retired, you may feel like you can finally relax while living out your golden years. However, there are retirement risks that could threaten your standard of living in retirement. We take a look at the top 5 retirement risks and how to prepare.

If you're close to retirement or have already retired, you may feel like you can finally relax while living out your golden years. However, there are retirement risks that could threaten your standard of living in retirement. We take a look at the top 5 retirement risks and how to prepare.

You overspend and your savings accounts suffer because of it

Millions of Americans overspend and even more don’t have a budget. It’s easy to overspend when you are working and have an income coming in. You might find yourself in consumer debt or not allocating enough savings to retirement or emergency funds. This becomes even more critical once you are at or approaching retirement age, because you will be living on a fixed income that doesn’t leave much room for unexpected purchases. Set up a budget now that you can follow, allows for some flexibility, and won’t hinder your retirement.

There’s a chance you could outlive your retirement savings

With healthier lifestyles and new medical advances, you may live longer than you anticipated. This is great news to everyone, except your retirement accounts. This is why it is advisable to max out your 401k and Roth IRAs, diversify your portfolio, and save as much as you can. If you are fit and healthy, you may consider delaying the age with which you start receiving your Social Security benefits. Your monthly income will increase considerably if you claim at 70 versus at 62.

The market will go up, down, and change during your lifetime

If the market goes down before you’re about to retire, you may suffer significantly when it comes to your investments. In this case, it could take years before you recover—if ever. One of the best ways to mitigate this type of risk is to allocate your assets in the optimal way, depending on your age. Those who are in their 20s, 30s, and 40s have more opportunities to invest in riskier stocks. If you are in your 50s, you need to be thinking about less risky investments, even if the ROI is lower.

As you get older, your medical costs are expected to increase

Medical costs continue to rise in America and as you get older you inevitably have more healthcare costs like doctor’s visits, prescriptions, and surgeries. While Medicare will help, there are many costs that they will not cover. To offset this, consider investing more money, take out long-term-care insurance, or use a Health Savings Account (HSA) which is a tax-deductible savings account that can be used for qualified medical expenses.

You enable your adult children

This is a difficult topic for many, but it’s an important one to discuss. If you are funding your adult children’s lifestyle (or grandkids, nieces, etc.) then you are most likely actively hurting your own retirement. It can be hard to cut the cord and say “no,” but at this point in your life you need to look out for your long-term financial and physical health. If you find yourself struggling with this, consider speaking with your friends who also have adult children for advice or finding help through a family therapist.

Retirement should be a wonderful time where you reap the benefits of all of the hard work you put in over the years. Don’t let these risks become reality and sabotage your retirement dreams. If you don’t know how to mitigate these risks, a financial planner focusing on retirement will be able to give you advice.

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