According to a recent study, more people worry about running out of money than they do about dying. “The worry of running out of money has increased in recent years. In 2024, 63% say they worry more about running out of money than death, up from 57% in 2022.”
Now, death we don’t have much control over – but saving for the future is something we can handle.
First, let’s look at some of the reasons someone might run out of money in retirement:
- Underestimating expenses
- Lack of income tax planning
- Inflation
- Longevity
- Market volatility
- Healthcare costs
If looking at this list is making you panic, I have good news for you: a financial planner can help you plan for these events. Here’s how:
Underestimating Expenses
- Detailed Budgeting: A financial planner can help create a detailed and realistic cash flow plan by analyzing your current expenses and projecting future needs, including lifestyle changes and one-time costs. We will include special purchases and plans you have. We will plan for these ahead of time and be able to tell you if they are feasible.
- Expense Tracking: We can set up systems to track your spending to ensure you stay within your budget and adjust for any unexpected expenses.
Inflation
- Inflation-Proof Investments: Financial planners can advise on investments that tend to outpace inflation, such as stocks, real estate, or inflation-protected securities (e.g., TIPS - Treasury Inflation-Protected Securities).
- Adjusting Withdrawal Rates: We can help set and periodically adjust withdrawal rates to account for inflation, ensuring your savings last longer.
- Income Streams: Planners might suggest creating multiple income streams that can grow over time.
Longevity
- Longevity Planning: Financial planners can use statistical models and personal health information to estimate life expectancy and plan accordingly.
- Conservative Withdrawal Strategies: Planners often recommend conservative withdrawal strategies, such as the 4% rule, which can be adjusted based on personal circumstances.
Market Volatility
- Diversification: A financial planner can design a diversified portfolio to spread risk across various asset classes, reducing the impact of market downturns.
- Risk Management: We help assess your risk tolerance and adjust your investment strategy accordingly, balancing growth and stability.
- Rebalancing: Planners can periodically rebalance your portfolio to maintain the desired asset allocation and manage risk.
- Long-Term Focus: They can provide guidance to avoid making emotional decisions during market volatility, focusing on long-term goals.
Healthcare Costs
- Health Savings Accounts (HSAs): For those eligible, financial planners might recommend contributing to HSAs, which offer tax advantages and can be used for healthcare expenses in retirement.
- Insurance Planning: We can assist in selecting appropriate health insurance plans, including Medicare and supplemental insurance policies, to cover potential healthcare costs.
- Long-Term Care Insurance: Planners may suggest purchasing long-term care insurance to cover costs associated with extended care needs.
- Estimating Future Costs: Financial planners use tools to estimate potential future healthcare expenses and incorporate these into your retirement plan.
Retirement is often envisioned as a period of relaxation and enjoyment, a time when you can finally reap the rewards of a lifetime of hard work. However, the fear of running out of money can cast a shadow over these golden years. Remember, it’s never too late to start planning—take proactive steps today to ensure a comfortable and secure retirement tomorrow. CLICK HERE to make an appointment.
Diversification does not guarantee a profit or protect against a loss.