Worst-case Retirement Scenarios
It's not likely that you'll enjoy your retirement if you're worried that your money might run out before you pass on
. Reducing the chances of nest egg depletion should be the first goal you have in planning your retirement. You can fortify your retirement plans and finances by bracing for the worst that could come your way. Here are a few worst-case retirement scenarios that could happen to you if you aren't prepared.
Once you've stopped working, you might find your income inadequate, even for the most basic needs. Prepare for this by identifying what you'll be spending on when you retire. Use a spreadsheet, actual pen and paper, or budgeting software. Don't factor in impulse buys, luxuries, and inflation just yet. After you've arrived at how much necessities are going to cost, match your baseline expenses to anticipated and guaranteed sources of income, such as Social Security and pension. If your projected guaranteed income is equal to or larger than your baseline budget, this worst-case scenario shouldn't be a problem.
Inflation can result in a gradual yet significant drop in the value of your investments. Some sources of income, such as Social Security, adjust for inflation. However, other assets in your portfolio will require protection against inflation to help you preserve your nest egg. Stocks and precious metals, among other "sure-fire" commodities won't increase protection, as conventional wisdom dictates. You can go for TIPS or Treasury Inflation-Protected Securities within your retirement plan and I Series Savings Bonds without - these are government bonds which adjust to inflation and help you against market declines.
Long-term care can deplete your nest egg, big time. Health care expenses, especially within retirement, are expensive. The worst-case scenario is if you require this kind of medical attention. Although Medicaid can help you with the bills, you'll have to exhaust most of your money before they come to your aid. You can prepare for this scenario if you aren't that well-off by buying long-term health care insurance from a private insurance provider, taking advantage of CLASS, or the Community Living Assistance Services and Support Act, or buying an annuity with a rider for long-term care.
You might not want to think about these worst-case scenarios, but no retirement plan should be established without considering these possibilities. Preparing for the worst today can give you rewards in the guise of a comfortable and financially stable retirement. Talk to your retirement planner to know more about how you can avoid a worst-case retirement scenario and strengthen your financial planning.
by: Carina Smith
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