Unfortunately, risks are a fact of life. This is especially true when planning for retirement, where various risks will influence your planning at different stages. Most of these risks fall into one of four categories, which the Society of Actuaries defines as personal/family, healthcare/housing, financial, and public policy. Though you can’t possibly control all of these factors, there are some steps you can take to prepare in case your retirement plans change.
There are many reasons to retire later in life. Some people simply aren’t ready to retire early, while others would rather let their retirement funds and Social Security benefits build up over time. One risk you might not think about, however, is that employment in later life isn’t a guarantee. If you’re hoping to work longer, it might be a good idea to stay up-to-date on technical skills.
Another major concern is running out of money during retirement. Since life expectancy is longer today, longevity risk is a big concern. Other potential risks include a change in marital status, the death of a spouse, or the needs of a family member changing unexpectedly.
It’s no secret that healthcare costs in the United States have skyrocketed over the last few decades. Most people will face health issues at some point or another, meaning medical bills may become a sudden and expensive new worry. Even regular treatments for common issues can be prohibitively expensive. Unfortunately, there’s no easy solution to this issue. The best step you can take is to prioritize healthy habits throughout your life.
Another major risk is a change in housing needs. As health issues become more common with age, your needs may unexpectedly change. Many retirees require aid, whether it’s in the form of assisted living or a visiting caregiver.
Your financial situation will probably be very different when you’re twenty than it is when you’re fifty. For this reason, it’s important to continually adjust your strategy. Some things you’ll probably want to keep in mind are inflation, low growth rates on savings accounts, and stock market losses. All of these things can significantly lower the amount of money in your retirement budget.
While you may be able to maintain some control over other areas of risk, public policy tends to be totally out of our control. Cuts to Medicare and Social Security benefits will obviously affect retirees. Other changes also affect retirees, though. For example, changes in tax policy could affect your income. While you can plan for retirement based on policies that are currently in place, there’s no guarantee you’ll receive the same benefits when it’s actually time to retire.
Ultimately, it would be impossible to plan for every risk. But what you can do is discuss risks ahead of time with your spouse or loved ones to minimize them. The biggest risk is having no plan whatsoever. Even considering these possibilities prepares you for retirement better than having no plan at all.