Long-Term Care Risk
Long-term care risk goes hand-in-hand with longevity risk. As our society continually makes medical advancements, we are able to live longer, but for some this may come at a cost. Many elderly people no longer have the ability to care for themselves, and they have to rely on either family members or professional caretakers to watch over them. According to a study by AARP, 66% of people aged 65 in 2005 will need some type of long-term care during their lifetime. Long-term care insurance policies are the primary way to mitigate this risk, but they are expensive and many people don’t like the “use it or lose it” terms of these policies. Therefore, life and long-term care insurance hybrid policies have recently become more popular. These policies allow you to access the death benefit for long-term care needs while you are still living, yet still provide a death benefit to your beneficiary after you pass away if you do not end up requiring long-term care.
Financial Elder Abuse Risk
A growing risk that retirees face is financial elder abuse. Financial elder abuse occurs when someone tries to take advantage of an elderly person for their own financial gain. What many people don’t know is that elder abuse most often comes from family members! One way to help prevent elder abuse is to simplify your finances as you get older. The less accounts a retiree has, the less accounts they have to monitor. Another way is to work with a trusted financial advisor, who can act as a safeguard if bad actors are trying to swindle money away from those who are no longer able to track their finances as easily as they have in the past.
Sequence of Returns Risk
As we all know, investment returns are unpredictable. We often have very little warning when an event like the 2008 Financial Crisis will occur and send global stock markets tumbling. Negative returns in the first few years of retirement can be detrimental to the success of a retirement plan. It is important to make sure you have a well-diversified portfolio heading into retirement with a mixture of stocks, bonds, and cash. If the stock market were to decline while you’re pulling money from the portfolio, you need conservative investments to draw from so you can allow the stocks to recover.
Loss of Spouse Risk
Losing a spouse can be a turbulent point in anyone’s life. It can be very hard to make sure you have your financial house in order after enduring such a tragic event, especially if the recently deceased spouse handled all of the finances. One of the best ways to ensure the surviving spouse maintains their level of lifestyle is to have a comprehensive financial and estate plan. Hiring a financial advisor in retirement gives the surviving spouse an advocate in such a trying time. The advisor should help create a plan to ensure the surviving spouse has enough assets and income streams to not alter their lifestyle.
If you or anyone you know is nearing retirement, contact Sharkey, Howes & Javer to meet with a CERTIFIED FINANCIAL PLANNER™ and develop a financial plan that helps mitigate these and other retirement risks.