Marc A. Hebert's Money Sense: Some ways to avoid going broke in your retirement yearsBy MARC A. HEBERT
March 09. 2018 7:42PM
Retirement is a major milestone that brings many changes. One of the biggest fears retirees have is outliving their savings. According to the Transamerica Center for Retirement Studies, 41 percent of retirees have this as a concern. This goes hand in hand with the finding that only 46 percent of retirees believe they have enough of a nest egg to last through retirement.
It might help to face your fears. While you can go broke in retirement, with careful planning you can prepare your finances to make the best of your retirement. Here are a few planning ideas to get you started:
You likely either have too little or too much invested in stocks. While stocks can be risky, they also provide the growth you will need for your portfolio to remain funded. On the flip side, investing too much in stocks will add unwelcomed volatility to your portfolio. You need to develop a strategy that is right for you.
Living too long is a concern. A long life can be a blessing. As you plan for retirement, plan for a long life. If your retirement savings come up short, start making other plans. These could include downsizing your home, relocating to a less expensive area, working a part-time job or starting an encore career.
The most obvious problem surrounding not having enough money to last your retirement years is just plain spending too much. Take a close look at your retirement budget and stick with it.
Relying on a single source of income can be a significant problem for retirees. For example, the Transamerica Center for Retirement Studies indicated that for 61 percent of retirees, Social Security is the primary source of income. If this is the case, the future of Social Security benefits is a big concern.
Given this, it is a good idea to have multiple sources of income. Some retirees have pensions. Others might have the benefit of an inheritance. For most though, saving in your retirement accounts - 401(k)s, IRAs and brokerage accounts - is necessary.
Retirement for some isn't a choice. The health of the retiree or a loved one could be the cause. Others reasons include changes at the companies they work at, losing their jobs or taking buyout offers. This is another good reason to review your savings.
You need to consider the effect health has on retirement. As we age, our health is bound to deteriorate. Obtaining the proper care is expensive. Make certain to factor health care costs into your retirement budget. This is also the time to consider getting a supplemental Medigap policy to cover the costs that Medicare doesn't. Long-term care is an even bigger issue. While expensive, long-term care insurance can help protect your assets if you need to enter a nursing home.
An insurance review for other areas of your life is important. Make sure your home, auto and umbrella coverages are adequate. Your property and casualty agent can help you with this. One unfortunate lawsuit can wipe out your entire life savings without proper insurance.
Developing a smart withdrawal strategy for your retirement accounts can help your money last. When making withdrawals, consider the tax impact. Make sure to take your required minimum distributions from your retirement accounts. Failure to do so carries a stiff penalty.
A final point to consider is to watch for scammers. Seniors are the prime targets for criminals. Perpetrators might be closer than you think. According to a study from MetLife and the National Committee for the Prevention of Elder Abuse, family members and caregivers are the perpetrators of scams 55 percent of the time. Carefully review who you trust with your money.
Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at email@example.com. Your question and his response might appear in a future column.