Retirement Risks & Tips
Retirement is supposed to be a time to enjoy life after years of working and providing for your family. However, numerous obstacles can adversely affect a person's ability to enjoy retirement. Understanding the risks and planning for them can help mitigate the problems encountered in retirement.
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Outliving Your Income
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The cost of living increases as inflation rises. Retirees on fixed incomes experience difficulties making ends meet as day-to-day costs go up but their income doesn't. This affects retirees who rely strictly on Social Security income but also affects those on pension income and those pulling supplemental income from Individual Retirement Accounts (IRAs).
Start Saving Early
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Those who start saving for retirement in supplemental savings plans increase their chances of having ample income and assets throughout retirement. Supplemental savings refers to many different types of accounts including employer-sponsored 401k plans, IRA savings, life insurance and annuities. Financial advisers recommend using these tax-deferred investments to reduce the annual tax liability while money grows. The sooner you start savings, the more time you have to accumulate assets. Even minors can open IRA accounts as long as they have earned income to contribute into it.
Fluctuating Investments
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While placing supplemental savings into investments for growth is a positive investment strategy, as investors near retirement, they should consider placing the majority of assets into more conservative investments. Those who feel they still need extra growth may stick with higher risk investments only to find that the investments have dropped considerably when they try to take the money out. Retirees can reduce investment risk by slowly transitioning from mutual funds and stocks into fixed income investments such as time certificates, fixed annuities and bonds.
Minimize Your Lifestyle
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Reducing obligations as you near retirement helps ensure that your income can still pay for basic expenses and hopefully enjoy some of your favorite activities. Downsize your home into a smaller location or apartment to reduce mortgage, utility and maintenance expenses. Pay the car off and have it regularly maintained to reduce auto expenses. Utilize senior discounts at restaurants, golf courses and public transportation to enjoy the things you love for less.
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References
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