Most of us, throughout our working lives, envisioned retirement as a time to look forward to financial stability, relaxing and enjoying the fruits of our labors. The reality of retirement can sometimes present unforeseen challenges. Any of a thousand circumstances can arise, ultimately leading to lower cash reserves for retirees. At a time in our lives when we are no longer working. Even the most well-planned retirements can be confronted unanticipated expenses, economic instability, or God forbid, health-related issues that affect your financial security at a time when cash reserves are more important than ever before in our lives.
I am not a financial planner or advisor and I do not offer any counsel or guidance. This article is nothing more than a collection of personal thoughts and observations. I suggest you do your own homework and consult with a professional financial advisor before making any decisions regarding your hard-earned money.
1 – Predictability is an illusion in retirement planning.
Planning your retirement typically involves thorough consideration of a number of influences such as your savings and investments as well as Social Security benefits and pension plans. These fundamentals do provide you a foundation for your fiscal wellbeing, but unfortunately the voyage through retirement isn’t always as predictable as we would expect.
2 – Stock Market Volatility
I’m not sharing any breaking news when I say that financial portfolios are dependent on fluctuations in the market. Even a well-diversified portfolio may still go through slumps, affecting the overall value of your nest egg.
Impact on Life Savings: A sudden decline in the stock market can drastically shrink the value of your investments, affecting your accessible resources.
3 – Healthcare Costs: An Inescapable Reality
As we get older, the cost of our healthcare tends to increase, and unanticipated medical problems can challenge even the best of retirement plans.
Impact on Cash Reserves: Extremely high medical costs, particularly those which are not covered by your insurance, can drain your savings and limit your capability of living up to your other financial commitments.
4 – Outliving Your Money
The good news is we are living longer.
The bad news is our Increased life expectancy brings with it the risk of outliving your money. This is especially true if your initial projections did not take more years of retirement into account.
Once more, the Impact on Your Cash Reserves: This requirement for prolonged financial assistance can put a huge depletion of resources, which will necessitate watchful budgeting and perhaps even a reduction in lifestyle.
5 – Inflation eats away at the purchasing power of our money over time, affecting the overall cost of living and decreasing the real value of fixed income sources. Our money won’t go as far as we had planned, which in turn requires modification of purchasing decisions.
6 – What Can You Do?
Again, I am not a financial advisor, so with that in mind, it occurs to me that while the concerns mentioned above are ever-present, there are preemptive measures that retirees might use to deal with depleted savings and ensure financial buoyancy. Better yet, if you have not yet reached retirement age, the sooner you begin preparing for your financial future the better. Start while you are young. Learn as much as you can. Seek out wise counsel then decide what is the best course of action for you to take.
7 – Periodic Financial Reviews
Conducting regular evaluations of your financial health with a professional financial advisor may not be a pleasant thought, but a comprehensive review of your investments, and budgetary requirements could be one good way to stay informed about changes in spending and/or income.
These periodic checkups could enable you to make up-to-date and informed choices, tweak your fiscal tactics to work to your advantage and perhaps the biggest benefit, identify potential issues before they worsen.
8 – Diversification to Manage Risk
Putting together a well-balanced portfolio that employs a blend of assets to bear up to an unpredictable market to work for you could help you protect your investments against major losses in any one particular sector. The objective being to cultivate stability in the face of economic oscillations.
9 – Healthcare and Insurance
Hopefully you are in good health. Hopefully you have good group coverage provided by your employer if you are still working.
Once you retire and go on Medicare, there are a number of policy options that will supplement your coverage. I would suggest that you take a look at them to determine what makes the most sense for you. From my own personal experience, it was a good thing I did. I was one of those people who never went to the doctor. Then, in my late 60’s my body began to wear out on me. I had an eye stroke which left me blind in my right eye in a matter of minutes. My aortic valve became a major, life-threatening problem. When I went in for surgery to replace the valve, they found an aneurism that was about to burst. I believe the surgeon used the term “dead man walking” when after the surgery, he told my daughter it was a wonder I even made it to the hospital alive that day. And now I need reconstructive surgery on my left shoulder. Yeah, I went from being what I thought was a specimen of good health to a broken-down old man in just a couple of years.
I’m eating right and exercising again. Feeling better but still a ways to go. My point here is that if I had not chosen the right supplemental coverage, my medical bills would have bankrupted me. So I suggest you don’t take your future health for granted simply because you have been healthy so far. A few extra bucks on the supplemental insurance was a good investment for me.
A lot of if not most life insurance agents are excellent resources to help you with financial planning. Life insurance policies can accomplish a number of things. Whole life policies can serve as investment vehicles which will accumulate cash value over time. If necessary, you can borrow against the cash value or you can allow it to grow and provide a larger death benefit for your beneficiaries. There are also policies that can serve as long-term care policies with a death benefit. For example, you can purchase a life insurance policy with a $500,000 which can pay out any one of three ways: If you go into long-term care, it will cover the cost up to the limit of the policy, in this case half a million dollars. Or if you die before the half-million is all spent, the remainder will be paid out as a death benefit. The third way would be if you died without ever going into long-term care, in which case it would all be paid out as a death benefit.
Keep in mind that these options are not suggestions. I’m only mentioning them for general information. I suggest you contact a trusted life insurance agent to discuss your insurance needs.
In general, the Implementation of prudent control of spending, and remaining open-minded to honest evaluation and making lifestyle modifications if and when the need arises can stretch your savings. If you find that living expenses have become an ever-increasing burden, focusing on and making needs a priority over wants, perhaps even downsizing, can relieve stress. Taking the initiative with regards to expense oversight, thoughtfully using cash reserves, could aid in your efforts to sustain economic stability and set you up for success in the long run.
10 – Maintaining an Emergency Fund
establishing an adequate emergency fund designated to cover unexpected expenses is the equivalent of keeping a fire extinguisher in your kitchen. You hope you never have to use it, but it is reassuring to know it is there. Your emergency fund can prevent the exhaustion of cash reserves during hard times.
An emergency fund serves as a financial shield, allowing retirees (or anyone of any age, really) to deal with unanticipated expenses without having to sacrifice long-term financial security.
11 – The Role of Financial Education and Professional Advice
In addition to employing these strategies, we can benefit from ongoing financial education (start now if you haven’t already – be a lifelong learner) and advice from professional financial advisors/planners. Staying up to date on current economic trends, investment options, and changes in legislation can help us to make informed decisions – as opposed to WAGs – that are in sync with our financial goals.
Looking back, there are a number of things I would do differently if given the chance. When I was young, I wasn’t making much money. My wife was working and also not making much. Basically we were living hand to mouth. Paycheck to paycheck. I now see that even though my boss was not one to pay what I felt I should have been making, I believe that if I had approached him with a request that he teach me “how money works” he might have been receptive. Even though I had no funds available to invest, if he would have taken a little time to show me how he invested, how the stock market works, pointed me in the right direction toward books that would help me learn and understand, and then answered questions … how much better off we would have been years later when I was finally making good money. But, I must confess that in my 20s and 30s those thoughts never crossed my mind. Financial literacy might have been obtainable, along with a mentor. I had no idea that such a powerful tool for navigating the complexities of retirement was right there in front of me.
It’s not too late. It’s never too late to make a difference. So now is the best time for me to learn what I can, then maybe I can pass some of it on to my daughter and grandchildren. Lord knows, the kids growing up in today’s world are going to need all the help and resources they can get.
So maybe it’s a good idea to take advantage of financial publications, sit in on some workshops (with the understanding that they are going to try to sell you on something – buyer beware), and consider consulting with reputable financial advisors to enhance financial literacy. Just make sure they are there to serve you and not to milk you for all they can get.
Conclusion
Low cash reserves in your retirement years presents challenges. Taking the initiative in financial planning, taking advantage of ongoing education, and making adjustments as needed can provide the foundation and flexibility to deal with these difficulties. The journey through retirement is challenging, and unexpected events will no doubt occur, but a combination of financial literacy, wise decision-making, and good professional advice can influence your long-term financial well-being. By embracing financial hardiness, seniors can confidently navigate the long and winding road of retirement, and the golden years can be defined by financial stability, security, and the freedom to enjoy life – the freedom to attack our bucket lists with authority!