Don’t Make This Mistake in Your Retirement Planning
Filed under: Retirement
A documented, detailed retirement plan can be a valuable tool in helping you live the life you’ve imagined for yourself after you stop working. However, a retirement plan is only as good as the assumptions upon which it’s built.
When you create your retirement plan, you often must make assumptions about many factors, including your spending in retirement, how long you will live and how your investments may perform. If any of those assumptions turns out to be highly inaccurate, your plan may not be very effective.
One of the biggest assumptions you may make in your retirement plan is the age at which your retirement will start. Many workers assume that if they’re behind on their savings, they can simply close that gap by delaying their retirement. By working longer, they can contribute more to their savings and reduce the number of years in retirement that they will have to fund with their own assets.
In fact, according to a study from Transamerica, many baby boomers are banking on that strategy. The study found that two-thirds of baby boomers are planning to work past age 65. And 15 percent say they plan on never retiring. Of those who plan on working past age 65, two-thirds say their plans are due to financial reasons. They either haven’t saved enough, need the health coverage or need the income.1
Unfortunately, even if you plan on delaying your retirement, the decision may not be up to you. A study from the Employee Benefit Research Institute found that 46 percent of retirees were forced to leave their career earlier than they’d wanted to.1
There are many reasons why you may not be able to delay retirement. Below are three of the most common. If you haven’t created contingency plans for these challenges, you may find that the decision of when to retire isn’t yours to make.
Health challenges often force workers to leave their career earlier than they’d anticipated. Many people mistakenly assume that disability is related only to unusual accidents or a complete loss of physical abilities. However, the truth is that it may not take much to make you physically unable to perform your job. A back injury, heart issues, cancer or other serious illnesses could force you to leave the working world early.
Many employers offer disability insurance. However, this type of insurance often only provides benefits for a limited amount of time. Social Security also provides disability benefits. Again, though, you may find that Social Security disability benefits are insufficient to meet your income needs.
If you haven’t yet done so, you may want to look at a long-term disability insurance policy, which could provide you with income replacement benefits to support your financial needs until you retire. You also may want to build up an emergency reserve fund that you could tap into in case you need to leave your job a few years earlier than you’d planned.
It is also possible that you could be forced to retire early because of a layoff or some other form of job loss. While that situation may not seem likely today, the business world can change quickly. No matter what business or industry you’re in, there’s always a risk that conditions could change and your job could be in danger.
Again, it may be helpful to create a sizable reserve fund that you could use in the event that you lose your job and are unable to quickly find new work. Also, just because you’re nearing the end of your career doesn’t mean you should stop learning and improving your skills and abilities. Make yourself valuable so that if your employer is considering layoffs, you will be less likely to lose your position.
Finally, you may want to consider the possibility that you may have to leave the working world to provide care for your spouse or some other loved one. The U.S. Department of Health and Human Services estimates that 70 percent of all retirees will need long-term care at some point.1
If your spouse developed an illness or injury that required extended care, would you be able to hire help so you could continue working? Or would you have to leave your job to provide the care yourself? You may have a parent at an advanced age who requires round-the-clock care. You may need to leave your job to provide care for that parent.
Do you have contingency plans for these challenges? If not, let’s talk about it. Contact us at Ambrose Financial & Insurance Services. We can help you analyze your risk exposure and develop a strategy. Let’s connect soon and start the conversation.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.16532 – 2017/3/22