The Worst Financial Shocks in Retirement You Need to Save For
Retirement is meant to be a period of rest after decades of hard work. Most people will rely on retirement savings for income, which can be depleted quickly if unexpected emergencies arise. Outliving your retirement savings is a major concern for many retirees. When you don’t account for life’s emergencies or unforeseen events, you could end up without a nest egg sooner rather than later. Understanding the most common financial emergencies that can set you back can help you create a more proactive savings plan to offset the damage.
Medical Emergencies
While medical emergencies can happen at any time, from broken bones to car accident trauma, they’re a lot more likely when you get older. Mobility can decline, leading to potentially hazardous falls or necessitating surgical interventions. You are more susceptible to major conditions such as dementia, cancer, and heart disease, which often require costly treatments. While you’ll have medical coverage for these occurrences, not all procedures may be covered. Emergencies may also occur with other family members, resulting in additional out-of-pocket expenses. It’s smart to save for many medical emergencies in your retirement fund, as they can easily dip into your savings far too soon.
Unexpected Long-Term Care
Even if you plan on aging in place at your home, certain conditions, such as dementia, can change your plans quickly. Long-term care communities, such as nursing homes or assisted living facilities, can provide older adults with the more intensive medical care they need. Health insurance can cover some of this care, but many older adults must pay out of pocket for certain rooms, communities, procedures, or time periods. Long-term care can be very pricey, and you should consider this in your retirement plan.
Major Home Repairs
If you own a home, it will age right with you. Regular maintenance can prevent many major issues in a house, but natural disasters or accidents can still result in costly damage repair. Certain home features, such as roofing or air conditioning, require periodic replacement, which can cost thousands of dollars. If you plan on retiring at home, keep an emergency fund for home repairs.
Family Support
Not all of your financial emergencies will happen directly to you. Many older adults are heads of the family whom younger members turn to when things go wrong. If children or grandchildren lose their jobs and require additional financial support, you may need to cover some of the costs. Preparing for these expenses can help you avoid dipping too much into your retirement funds.
Inflation or Market Downturns
Many retirement funds rely on the stock market to grow savings. In the long term, you’re more likely to see positive returns. Short-term market crashes or downturns can significantly impact your retirement savings, reducing the amount of income you’ll have. Inflation that rises dramatically can also limit the extent to which your savings will go in the future. Factor in inflation and market instability when planning your savings; diversify your income and save as much as possible to protect your financial stability.
Legal Emergencies
Before you retire, you will likely have some assets that you’ll need to pass on when you die. You can obtain a lawyer to help you draft a will or trust to dictate what goes where at the end of your life. Expenses for these legal procedures are typically minor, but this may not be the only time you’ll need an attorney as an older adult. Seniors are particularly susceptible to financial scams and fraud, especially online. An attorney may be able to help you recover compensation, but you’ll have to pay steep attorney fees. Elder abuse can occur due to the negligence or intentional harm from a caretaker as well. Attorneys can assist you with recovering damages, filing a report, and more. Nursing homes or assisted living communities can lead to abuse if there are staffing or community issues. In tragic cases, neglect or abuse can even lead to wrongful death. Your loved ones can obtain a nursing home wrongful death lawyer, but it can cost a decent amount of money to pay for legal fees. While no one anticipates these tragedies, it may be wise to set aside some funds in case an attorney is needed for any reason.
Vehicle Replacement
Your vehicle won’t last forever. Compared to medical or housing emergencies, a car doesn’t cost as much, especially if you opt for used versions. A new car can set you back a few thousand dollars easily, which can harm your retirement savings. Plan for vehicular expenses as much as possible, including inevitable replacement if necessary.
Conclusion
No one can predict what emergencies will or won’t occur during retirement. However, including these potential emergencies in your savings plan can help you avoid financial insecurity and additional stress during your golden years. Medical emergencies, vehicle replacement, home repairs, family support, or long-term care may all be expenses that you will need to cover during retirement. You don’t want to withdraw too much too soon, or you could end up being unable to afford necessities. With a proactive plan to account for emergencies in your savings, you’re less likely to fall on hard times.
