As baby boomers approach retirement, many may find themselves in different economic circumstances than what they planned for. Recent economic events have taught us the downside of risk, yet careful planning can help soften the impact. Your retirement plan can stay on track if you focus on these six key risks.
Longevity Risk
Americans are living longer. There’s a 50% chance that a 65-year-old man today will live to age 88 and a woman to age 901. Unless you’re realistic about how long you may live, you may be putting yourself at risk of outliving your retirement savings.
Market Risk
Participating in the stock market can give your retirement savings and income the potential to keep pace with inflation. However, volatility in investment markets can significantly impact how long your money will last.
Inflation and Taxes
With inflation reducing purchasing power and taxes impacting liquidation strategies, less money will be available to spend or invest in retirement planning. And with taxes, all the money you’ve been putting away in tax-deferred accounts will be subject to tax when you begin withdrawing in retirement.
Health Care Risk
Rising medical and prescription drug costs, fewer employer-sponsored retiree benefits and Medicare limitations are impacting income and retirement savings. According to Medicare.gov, estimated health care costs for a 65-year-old range from $3,000 for someone in excellent health to $10,000 for someone in poor health. That includes premiums, deductibles and co-pays but not long-term care, vision or dental expenses.
Long-term Care Risk
The cost of care for an unexpected event or long-term illness not covered by private insurance or Medicare is requiring more Americans to deplete their assets prematurely. Someone turning 65 today has an almost 70% chance of needing long-term care in his or her lifetime. And those services are typically not covered by Medicare, Medicaid or health insurance.2
Legacy Risk
Many Americans want to leave a legacy, making an impact beyond their lifetime by leaving a financial gift to a loved one or a charity. It is necessary to balance this desire with the need to fund an individual’s retirement.
With your retirement at stake, these risks can seem overwhelming — but you don’t have to go it alone. Working with a trusted financial professional will help you keep these risks in mind as you approach retirement, keeping you on track toward the retirement you’ve always envisioned.
Do you need help with your retirement? Contact Jared Nickoli at LiveWell Capital at livewellcapital@nm.com to learn more.
Jared Nickoli uses LiveWell Capital as a marketing name for doing business as a representative of Northwestern Mutual. LiveWell Capital is not a registered investment adviser, broker-dealer, insurance agency or federal savings bank. Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company, Milwaukee, WI (NM) (life and disability insurance, annuities, and life insurance with long-term care benefits) and its subsidiaries. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.