Even if you've been saving and planning carefully for retirement, these unforeseen issues can disrupt and delay your retirement:
1. A Medical Crisis
Medical bills are the leading cause of bankruptcy in the United states. An injury or chronic illness can drain your financial reserves. You can protect your income with disability insurance which replaces a portion of your income if you can't work.
Also, the development of Alzheimer's or Parkinson's can drastically impact your retirement savings.
These exceedingly challenging diseases take their toll emotionally on spouses, family members and care-givers. But the cost of long-term care for chronic illnesses can also completely 'blow up' even the best retirement plans.
The solution? Long-term care insurance can protect your retirement savings by covering the expense of care for you and/or your spouse - whoever needs assistance.
2. Spouse Dying Without Life Insurance
Sadly, it's not uncommon for people to die without providing a "safety net" to those that are left behind. Common thinking says that once your children leave home, you don't need life insurance anymore. But this just isn't true.
Think carefully about how much of the household income will be impacted if the major earner dies. Be prudent and plan accordingly to protect those you love.
3. Aging Parents
There are some pretty sobering statistics out there on caring for aging parents (Ref: 2015 National Institute on Aging "Health and Retirement" Study):
If you are faced with caring for aging parents, check out the resources at the National Council of Aging at www.benefitscheckup.org for more information.
4. Adult Children Returning Home
Parents who support adult children are more likely to postpone their retirement. Plan now to teach your children about finances and set the expectation for financial self-sufficiency.
If a crisis does land your adult child back home, discuss an exit strategy. Be clear that you're a safety net, not a long-term solution.
Chances are that at least one of these situations/scenarios will happen to you.
Now is the time to take steps to make sure that you have a realistic plan in place to cushion the impact of these threats to your to retirement.
Ever find yourself bogged down or intimidated by all the things you're supposed to have done to prepare for retirement?
It's true that's there's a lot to consider as you plan for retirement. But sometimes, as my mother used to say, "It's hard to see the forest for the trees."
In other words, it's easy to get too involved in the details of retirement planning and fail to look at your situation as a whole.
So...when you think about retirement planning, take a deep breath, stand back and think about the two factors you absolutely must manage to be able to get to retirement and to stay retired:
One. Your income
Two. Your expenses
That's it! Sounds simple but I meet a lot of folks who have been working to build their retirement assets, but have not considered their retirement expenses.
For example, if you believe your monthly spending in retirement will be $4,000 per month but it's actually really closer to $6,000....well...that's $2,000 per month or $24,000 per year more than you think you need for retirement.
How long do you think your retirement savings can handle an extra $24,000 per year in after-tax dollars that you didn't include in your retirement planning?
Retirement is not an event. It's another phase of life and it requires clear thinking and planning.
Start with the big concepts.
Figure out your retirement income and outline your anticipated expenses - including travel, visiting the grand-kids and whatever else you've been looking forward to in this phase of life.
The key is to manage both your retirement income and your expenses. If you do this, you'll go a long way toward building a retirement plan that will last.
Time to take inspiration from the fitness expert, Jack Lalanne.
A self-described emotional and physical wreck while growing up, Mr. LaLanne began turning his life around after hearing a talk on proper diet at age 15. Mr. LaLanne started working out with weights when they were an oddity. In 1936 he opened the prototype for the fitness spas to come - a gym, juice bar and health food store.
At the time, doctors advised their patients to stay away from his health club, a business totally unheard of at the time. Patients were warned that, "LaLanne was an exercise 'nut' whose programs would make them muscle-bound and cause severe medical problems."
It's amazing to look back now and consider how the prevailing experts were wrong about the effects of exercise and fitness.
It's also worth considering that much of the prevailing financial advice you hear from TV financial gurus or other "experts" may not be complete or correct either.
You're not going to create a financial strategy for yourself that is flexible, responsive to change and that will work in both a strong and weak economy by doing what everyone else has always done. And just like Mr. LaLanne, it makes sense, at times, to challenge the status quo and step outside the box of conventional thinking.
You have far greater financial flexibility, creativity and strategy available to you than just following the predictable, common-place and incomplete advice you hear every day:
I work with you to develop your skill and financial knowledge. We discuss your life choices, values, and overall personal, family or business situation and outlook.
Then together we choose appropriate financial products that fit into and support your customized, personal, lifetime financial strategy.
I mentioned last month that there are straight forward strategies you can use to help ensure you don't end up outliving your retirement funds.
In May, we covered the first strategy:
1. Start Planning for Your Retirement Tax Situation NOW!
This month, I want to talk with you about Social Security. The second strategy is to focus your attention on Social Security:
2. Avoid Missing Out on Thousands of Dollars in Social Security Benefits
Social Security is an incredibly important program because it offers you two valuable benefits.
However, according to the Social Security Administration, over 74% of people who apply for Social Security benefits leave money behind.
Because many people think that you apply for Social Security benefits and then you just "get what you get." Not true. With Social Security, there are important strategic decisions that affect the amount of money you can receive from this program.
Three key strategies that will grow your Social Security payments:
1. Delay Claiming
You can increase your Social Security checks by delaying when you sign up for Social Security. When you delay payment until age 70, the monthly payment is 32% higher than it would be if you had started to take benefits at age 66. Your payment at age 66 is 33% higher than at age 62.
2. Take Advantage of Spousal Benefits
Married couple are entitled to claim Social Security benefits worth up to 50% of the higher earner's benefit. And when one spouse dies, the surviving spouse receives the higher earner's benefit.
3. Maximize your income now
Your Social Security payment is figured using a complex calculation based on your 35 highest contributing earning years. Each year's wages are indexed for inflation before being averaged. By understanding that your earnings directly impact the Social Security benefits you can receive, you can strategize now. For instance, you may choose to work a year or two longer, to ensure that all 35 years show income.
I've listed three important strategic factors in planning for Social Security. But there are other strategic considerations with Social Security and it's important to get it right.
Understanding your personal situation and how it integrates with Social Security can mean a difference of hundred's of thousands of dollars in retirement income over your lifetime.
You paid into the Social Security program your entire working life. With planning and some forethought, you can get what you have earned.
I've always found flashy New Year's "resolution" lists a little suspect.
Personally, I enjoy entering the New Year quietly rather than with trumpets blazing and grand pronouncements.
And the same is true with financial goals and a lifelong plan. Your financial strategy shouldn't be full of flashy highs and scary lows.
Rather, your financial strategy needs to hum along quietly and steadily - providing you and your family with flexibility, security, sustainability, predictable growth, and freedom from financial loss (and the worry that this inevitably entails).It takes time and effort to build a lifelong financial strategy. This approach can deter folks who are focused on a quick return on their investment. It can also seem rather daunting to get started.
One of the questions my wife, Suzanne, and I ask ourselves when we want to make a change is simply, "What am I going to do differently today that will make a change in six months?"
By implementing actions each day to move ourselves forward, we cover the distance we need to reach our goals without trying to do it all in one grand leap.
Let this be the year you make progress on your financial independence. All you need to do is take that first step.
I look forward to working with you to set up an enduring financial strategy, one designed to work for you for the rest of your life.