What Could Possibly Go Wrong? 12 Retirement Disasters that Are Easy to Avoid


what could possibly go wrongBe sure to plan for everything that could possibly go wrong in retirement…What could possibly go wrong?  You’re nearing retirement, you’ve got money set aside and you’re ready to travel, spend more time with the grandkids or in the garden, and perfect your golf swing.

Unfortunately, plenty could still go wrong. You probably know to create guaranteed retirement income, have supplemental medicare insurance and to take care of your health but even the best-laid plans can get derailed.

Take a look at the top 12 worst things that could happen to your retirement plans.

1. What could possibly go wrong? Inflation!

A retirement plan that doesn’t take inflation into account could meet the needs of retirees early in retirement but fail to meet their needs 10 to 15 years in. Inflation normally only slightly increases the cost of goods and services from year to year.  However, in retirement, its impact is magnified as each year your dollars have less and less purchasing power.

From 1913 to 2013, the average US inflation rate was only 3.22%. That means prices doubled every 20 years.

Inflation also varies across goods and services. For instance, the cost of medical care has risen at a significantly faster rate over the last 10 years than average inflation. That’s a big hit to retirees, who devote a substantially larger share of their budgets to medical care.

Use a retirement calculator that gives you control over inflation rates and run some what if scenarios to see the impact on your cash flow, net worth and expenses.

2.What could possibly go wrong? Boomerang kids

Today, many adults nearing retirement age are providing financial assistance to their grown children while in the later stages of their own careers – typically prime earning and investing years.

People age 50 and older have the opportunity to beef up their retirement accounts with additional “catch-up” contributions of $6,000 to IRAs and 401(k)s.  If they’re still supporting their adult children, they may not have the room in their budget to make those catch-up contributions. Spending an extra $500 per month on gas, groceries, and health insurance costs for an adult child adds up to an extra $6,000 per year that could have gone to retirement savings.

At age 50, putting away an extra $6,000 per year in your 401(k) could grow the balance by nearly $125,000 by the time you’re 65, assuming a 5 percent annual return.

3. What could possibly go wrong? Claims from potential creditors

And speaking of kids, remember that car loan you cosigned for Junior when he said, “what could possibly go wrong?” If Junior loses his job and can’t make the payments are you ready to pay off the loan? If you have debt or have cosigned a loan those debts can come back to haunt you. If you are involved in an accident, it’s possible you could be sued. Even if you win and don’t have to pay out a large settlement, it’ll cost you money to defend yourself.

That’s why it’s important to consider where your money is saved. Funds in a retirement plan set up under the Employee Retirement Income Security Act (ERISA) are normally protected from judgement creditors. ERISA-protected accounts include 401(k) plans, deferred compensation plans, and profit sharing plans. Non-ERISA accounts include IRAs (Roth and Traditional) and 403(b) plans.

4. What could possibly go wrong? Parents who need your help

If your kids don’t disrupt your retirement plans, your aging parents might. A 2015 study from BMO Harris found that nearly half of Americans aged 45 to 65 are juggling the demands of caring for children or their aging relatives. Ten percent currently care for both generations while 17 percent expect that they will have to care for the two generations at some point in the future.

The average cost of an assisted living facility is $3,600 per month, and that doesn’t account for more expensive senior care services, such as memory and Alzheimer’s care, which can cost several thousand dollars more. Remember that Medicare and most health insurance plans don’t cover long-term care.

Talk with your parents now about creative ways to plan for long term care costs.

5. What could possibly go wrong? You need long-term care

It’s not just your parents you need to worry about.

A 2014 article from Money called long-term care “the retirement crisis nobody talks about.” Plenty of people don’t have enough saved for retirement, but when you factor long-term care expenses in the mix, almost NOBODY has enough savings.

Unfortunately, not everyone will spend all of their retirement years being active and enjoying all of the fun things they had planned. In fact, someone turning 65 today has as 70 percent chance of needing some type of long-term care services in their remaining years.

Paying thousands of dollars for a long-term care insurance plan may be a bitter pill to swallow, but it’s something you may have to consider as part of your retirement plan.  Again, look at creative ways to plan for these costs.

Also, there are new hybrid Long Term Care and Life Insurance or Annuity products that can provide more flexible benefits.

6. What could possibly go wrong? You can’t work

A rapidly growing number of Americans are continuing to work well beyond their 65th birthday. Some because they want to continue working, and some because they can’t afford to give up that paycheck.

But what if you are unable to work into your retirement years? Since the economic downturn in 2008, annual surveys from the Employee Benefits Research Institute show that about half of retirees left the workforce before they were ready. Some were laid off from jobs they’d held for years and other say health problems made work impossible. A recent study showed that many people expect to work until 65, but actually left their main career job in their late 50s.

7. What could possibly go wrong? Volatile financial markets

Volatile markets cause a great amount of anxiety for retirees. If your retirement income comes from a pension, you can rest easy knowing that your pension payments are not subject to market risk. But in this day and age, chances are a large portion of your retirement savings is in 401(k)s and IRAs that are likely to hold stock investments that are subject to the risk of market volatility.

Annuities are one way to guarantee your retirement income, and here are some additional tips for turning savings into a reliable paycheck.

8. What could possibly go wrong? Change in benefits

Are you one of the lucky few with a pension? Don’t think you’re immune to disaster. A private retirement plan can change its rules or terminate at any time. If a plan terminates, participants are usually entitled to all of the benefits they have earned, but if your pension plan ends without enough money to pay all promised benefits, your benefit will be limited to the amount guaranteed by the Pension Benefit Guaranty Corporation.

Consider this: in 2005, United Airlines received court permission to default on its employee pension plan, to the tune of $3.2 billion in pension obligations. The PBGC assumed responsibility for the plans, which covered about 134,000 people, and many employees received far less than they were counting on for retirement.

If you have a pension, be sure to research the solvency of your plan and think seriously about the benefits of taking a lump sum payment instead of monthly income.

9. What could possibly go wrong? Your presidential candidate does not get elected

If the 2016 presidential election has taught us anything so far, it’s to expect the unexpected. Depending on who is elected in November and in coming years, the only thing that is certain is change.

What could possibly go wrong with a Trump presidency?  What could possibly go wrong with a Clinton presidency?  Ahem… Er…

Taxes are sure to be on the table.  The economy will likely shift.  Will the changes be good or bad? No one knows for sure.

10. What could possibly go wrong? Global warming

What could possibly go wrong with climate change and your retirement? As it turns out a lot could happen and it goes way beyond flooding the retirement beach house!

Many of the largest U.S. investment funds are doing nothing to protect their investor’s savings from the financial risks posed by climate change.

While the S&P 500 stock index is up 50% from 10 years ago, oil stocks over the same period are up just 1%. A 2013 report (downloads as PDF) from England’s Institute and Faculty of Actuaries found that unless things start changing, resource scarcity associated with climate change could stall the global economy and cause pension funds to be unable to pay out benefits.

11. What could possibly go wrong? Zombie apocalypse

Hey, we’re talking about the worst that could happen, right? When the zombies are heading toward your front door, those 401(k)s and IRAs aren’t going to be much help.

Okay, maybe this is ridiculous, but the point is that we don’t know what is going to happen in the future and we need to prepare our retirement plans for the unexpected.

In the meantime, check out the CDC’s zombie apocalypse survival guide.

12. What could possibly go wrong? You don’t have a retirement plan

If this is the worst thing that happens to your retirement, you’re in luck! Nobody can predict with 100 percent certainty what the stock market will do or when the zombies will take over, but needing a plan for retirement is certain and something you can get started on today.

No matter how young or old you are, it is not to late to create a plan.  Get proactive now and stick with it. You’ll be glad you did.

What could possibly go wrong? It's never too early or too late to start your retirement plan.



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