If you’ve been saving and investing for decades, you’ll want to know that you can retire without financial worries. Nonetheless, you should be aware of some comfortable retirement threats and how to deal with them.
These threats include:
Inflation – Inflation has been high lately, but even moderate inflation can severely erode purchasing power. In fact, with just 3% inflation, his spending could double in about 25 years, and his retirement could easily last that long. Therefore, if you rely on your investment portfolio for a significant portion of your retirement income, you should have the right number of growth-oriented investments with potential returns, such as stocks and equity-based funds. It may match or exceed the rate of inflation.
Excessive Withdrawals – Once you retire, you should set a withdrawal rate for your portfolio. This is an amount that gives you peace of mind that you will not run out of funds even if you withdraw each year. Some people make the mistake of withdrawing too quickly after retirement. Your withdrawal rate should be determined based on several factors, including your age at retirement, the size of your portfolio, and the amount of income you receive from other sources such as Social Security. Our financial experts can help you determine the withdrawal rate that is right for your needs.
Market volatility – Financial markets are always volatile. When you’re still working, this volatility may not be as much of an issue as it takes years, even decades, to bounce back from short-term downturns. But you don’t have to sell your investment when the price drops after you retire. To prevent this, leverage the cash in your portfolio, assuming you have enough money to cover several months’ worth of living expenses. You can also take advantage of CD “ladders” (groups of CDs that mature at different times) to provide resources for the next few years and give your equity investment time to recover its value.
Unexpected Expenses – We had expenses when we were working, and we will probably have them after we retire. For example, a car with a broken furnace or in need of major repairs. However, if you set up an emergency fund that covers a year’s worth of living expenses and keep that money in your liquidity account, you may be able to “get through” these expenses without jeopardizing your investment portfolio. . Keep these reserves separate from your regular day-to-day accounts to avoid the temptation to spend emergency money.
Health – Retirees may face more health concerns than younger people, and those concerns are often accompanied by significant medical costs. That’s why it’s important to get the most out of your Medicare or Medicare Advantage plan. You can also donate to your Health Savings Account (HSA) while you’re employed, and if you haven’t used it up, you can use the money when you retire. As long as HSA funds are used for eligible medical expenses, withdrawals are free of taxes and penalties and are not included in income. That could keep incomes below a certain level, lower Medicare premiums, and avoid the 3.8% surcharge on net investment income levied on wealthy taxpayers.
Retirement can be an exciting time in your life, but you’ll enjoy it more if you’re prepared for the challenges that all retirees face.
If you would like to discuss your personal situation with a financial advisor, please contact us at:
Mark Freeman
Edward Jones Financial Advisor
77 W. Main Street, Hopkinton, MA
(508) 293-4017
Mark.Freeman@edwardjones.com
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